1. Blackrock Fund has expected return of 10.5%, standard deviation of 17.5%, and beta of 0.8. Nippon Fund has expected return of 12.5%, standard deviation of 21% and beta of 1.1. The two mutual funds have correlation coefficient of 0.7. Find the expected return and standard deviation of the market. What is the riskless rate of return?

1. Blackrock Fund has expected return of 10.5%, standard deviation of 17.5%, and beta of 0.8. Nippon Fund has expected return of 12.5%, standard deviation of 21% and beta of 1.1. The two mutual funds have correlation coefficient of 0.7. Find the expected return and standard deviation of the market. What is the riskless rate of return?

Essentials of Business Analytics (MindTap Course List)

2nd Edition

ISBN:9781305627734

Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Publisher:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Chapter5: Probability: An Introduction To Modeling Uncertainty

Section: Chapter Questions

Problem 30P: Suppose that the return for a particular large-cap stock fund is normally distributed with a mean of...

See similar textbooks

Similar questions

The NXP fund has an expected return of 2.40%, with volatility 23.00%. The risk free rate is 1.40%, the market volatility is 17.50%, and the correlation between NXP returns and market returns is 0.16. What is the Treynor ratio for NXP? 0.004 0.048 0.062 0.043
If $x is invested in mutual fund A, the annual return has an expectation of $0.1x and a standard deviation of $0.02x. If $x is invested in mutual fund B, the annual return has an expectation of $0.1x and a standard deviation of $0.03x. Suppose that the returns on the two funds are independent of each other and that I have $1000 to invest. (a) What are the expectation and variance of my annual return if I invest all my money in fund A? (b) What are the expectation and variance of my annual return if I invest all my money in fund B? (c) What are the expectation and variance of my total annual return if I invest half.
If the risk-free rate of return is 2.1%, the beta of the mutual fund is 1.7, and the return of market is 5%, what is the required rate of return?
1)Please briefly define the following terms Risk Aversion Risk-Neutral Diversification Unsystematic Risk (also give examples) Systematic Risk (also give examples) 2)Please just list the four basic sources of long term funds. 3)Please explain the difference between the terms interest rate and required return by defining each. 4)Suppose you have a portfolio of Vestel and Turkcell with a beta of 1.8 and 0.9, respectively. If you put 29% of your money in Vestel, and the rest in Turkcell, what is the beta of your portfolio?
You have estimated the single index model (SIM) fund B and found that its alpha and beta are 0.035 and 1.1 respectively. The standard deviation of Fund B's excess returns is 30% and the market portfolio excess returns have a standard deviation of 20%. What's the information ratio of Fund B?
You have been given the following return information for a mutual fund, the market index, and the risk-free rate. You also know that the return correlation between the fund and the market is 0.97. Year 2018 2019 2020 2021 2022 Fund -20.6% Sharpe ratio Treynor ratio 25.1 13.9 7.6 -2.1 Market -39.5% 21.0 13.9 8.8 -5.2 Risk-Free 1% 3 2 4 2 What are the Sharpe and Treynor ratios for the fund? Note: Do not round intermediate calculations. Round your answers to 4 decimal places.
3) The risk free rate is 3.5% The expected return of a well-diversified fund is 13% and the beta is 1.15. The expected return of the Market is 9%. Compare both investments using the M² ratio.
The Manhawkin Fund has an expected return of 16% and a standard deviation of 20%. The risk-free rate is 4%. What is the reward-to-volatility ratio for the Manhawkin Fund? a. .8 b. .6 c. 9 d. 1
If a fund has a return of 12% and a beta of 1.4, and if the risk-free rate is 2%, and market return rate is 8%, calculate Jensen's Alpha O a. 3.6 Ob. 2.4 O c. 1.6 Od. 1.4
You are given the following data: Risk-free rate is 4.1 percent, market return is 6.5 per cent, and market volatility is 12.2 per cent. The return of a portfolio is 11 per cent, its volatility is 15.2214 per cent, and its beta is 0.7. Calculate the measure called the Information ratio. A. 0.193 B. 0.414 C. 0.548 D. 4.500
You have been given the following return information for a mutual fund, the market index, and the risk-free rate. You also know that the return correlation between the fund and the market is 0.97. Year 2018 2019 2020 2021 2022 Fund -15.20% 25.10 13.00 7.40 -1.56 Market -30.50% 20.10 Jensen's alpha Information ratio 11.20 8.00 -3.20 Risk-Free 3% 4 Calculate Jensen's alpha for the fund, as well as its information ratio. Note: Do not round intermediate calculations. Enter the alpha as a percent rounded to 2 decimal places. Round the ratio to 4 decimal places. Answer is not complete. 3.77 %
CAPM As an equity analyst, you have developed the following return forecasts and risk estimates for two different stock mutual funds (Fund T and Fund U): Fund T Fund U Forecasted Return CAPM Beta 1.20 0.80 9.0% 10.0 a. If the risk-free rate is 3.9 percent and the expected market risk premium (E(RM)-RFR) is 6.1 percent, calculate the required return for each mutual fund according to the CAPM. b. Using the estimated required of returns from part (a) along with your return forecasts, demonstrate whether Fund T and Fund U are currently priced to fall directly on the security market line (SML), above the SML, or below the SML. c. According to your analysis, are Funds T and U overvalued, undervalued, or properly valued?