Q13-5 Davita Spencer is a manager at Half Dome Asset Management. She can generate an alpha of 1.63% per year on up to $146 million of assets. After that her skills are spread too thin, so she cannot add value andher alpha is zero on any additional money under management. Half Dome charges a fee of 1.17% per year on the total amount of money under management (at the beginning of each year). Assume that there arealways investors looking for positive alpha and no investor would invest in a fund with a negative alpha. In equilibrium, that is, when no investor either takes out money or wishes to invest new money,a. What alpha do investors in Davita's fund expect to receive?b. How much money will Davita have under management?c. How much money will Half Dome generate in fee income?

Alpha is the excess return given by mutual fund over the benchmark rate of return and how much fund…

avita Spencer is a manager at Half Dome Asset Management. She can generate an alpha of 1.63% per year on up to $146 million of assets. After that her skills are spread too thin, so she cannot add er alpha is zero on any additional money under management. Half Dome charges a fee of 1.17% per year on the total amount of money under management (at the beginning of each year). Assume tha Iways investors looking for positive alpha and no investor would invest in a fund with a negative alpha. In equilibrium, that is, when no investor either takes out money or wishes to invest new money, What alpha do investors in Davita's fund expect to receive? . How much money will Davita have under management? . How much money will Half Dome generate in fee income?

avita Spencer is a manager at Half Dome Asset Management. She can generate an alpha of 1.63% per year on up to $146 million of assets. After that her skills are spread too thin, so she cannot add er alpha is zero on any additional money under management. Half Dome charges a fee of 1.17% per year on the total amount of money under management (at the beginning of each year). Assume tha Iways investors looking for positive alpha and no investor would invest in a fund with a negative alpha. In equilibrium, that is, when no investor either takes out money or wishes to invest new money, What alpha do investors in Davita's fund expect to receive? . How much money will Davita have under management? . How much money will Half Dome generate in fee income?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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