In addition to risk-free securities, you are currently invested in the Tanglewood Fund, a broad-based fund of stocks and other securities with an expected return of 11.16% and a volatility of 26.48%. Currently, the risk-free rate of interest is 3.94%. Your broker suggests that you add a venture capital fund to your current portfolio. The venture capital fund has an expected return of 24.95%, a volatility of 64.91%, and a correlation of 0.19 with the Tanglewood Fund. Calculate the required return and use it to decide whether you should add the venture capital fund to your portfolio. The required return is %. (Round to two decimal places.) Use the result of the above calculation to determine whether you should add the venture capital fund to your portfolio. Should you add the venture fund to your portfolio? (Select from the drop-down menu.)

In addition to risk-free securities, you are currently invested in the Tanglewood Fund, a broad-based fund of stocks and other securities with an expected return of 11.16% and a volatility of 26.48%. Currently, the risk-free rate of interest is 3.94%. Your broker suggests that you add a venture capital fund to your current portfolio. The venture capital fund has an expected return of 24.95%, a volatility of 64.91%, and a correlation of 0.19 with the Tanglewood Fund. Calculate the required return and use it to decide whether you should add the venture capital fund to your portfolio. The required return is %. (Round to two decimal places.) Use the result of the above calculation to determine whether you should add the venture capital fund to your portfolio. Should you add the venture fund to your portfolio? (Select from the drop-down menu.)

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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In addition to risk - free securities, you are currently invested in the Tanglewood Fund, a broad-based fund of stocks and other securities with an expected return of 9.65% and a volatility of 29.88% . Currently, the risk-free rate of interest is 2.88%. Your broker suggests that you add a venture capital fund to your current portfolio. The venture capital fund has an expected return of 27.64%, a volatility of 73.89%, and a correlation of 0.19 with the Tanglewood Fund. Calculate the required return and use it to decide whether you should add the venture capital fund to your portfolio. Answer: The required return is... % (Round to two decimal places)
In addition to risk-free securities, you are currently invested in the TanglewoodFund, a broad-based fund of stocks and other securities with an expected return of 14% and a volatility of 24%. Currently, the risk-free rate of interest is 3%. Your broker suggests that you add a venture capital fund to your current portfolio. The venture capital fund has an expected return of 20%, a volatility of 79 %, and a correlation of 0.2 with the Tanglewood Fund. Assume you follow your broker's advice and put 50% of your money in the venture fund: a. What is the Sharpe ratio of the Tanglewood Fund? Answer (Already calculated): Sharpe ratio of the Tanglewood Fund is: 0.458 b. What is the Sharpe ratio of your new portfolio? c. What is the optimal Sharpe ratio you can obtain by investing in the venturefund? (Hint: Use Excel and round your answer to three decimal places.) Please use excel for last question, four people from chegg has gotten this question wrong. Please get it right
In addition to risk-free securities, you are currently invested in the Tanglewood Fund, a broad-based fund of stocks and other securities with an expected return of 14% and a volatility of 24%. Currently, the risk-free rate of interest is 3%. Your broker suggests that you add a venture capital fund to your current portfolio. The venture capital fund has an expected return of 20%, a volatility of 79%, and a correlation of 0.2with the Tanglewood Fund. Assume you follow your broker's advice and put 50% of your money in the venture fund: a. What is the Sharpe ratio of the Tanglewood Fund?Answer (already calculated)= 0.458 b. What is the Sharpe ratio of your new portfolio?Answer (Already calculated)= 0.322 c. What is the optimal Sharpe ratio you can obtain by investing in the venture fund? (Hint: Use Excel and round your answer to three decimal places.)The optimal Sharpe ratio you can obtain by investing in the venture fund is *enter your response here* and the percentage in…
In addition to risk-free securities, you are currently invested in the Tanglewood Fund, a broadbased fund of stocks and other securities with an expected return of 12% and a volatility of 25%. Currently, the risk-free rate of interest is 3%. Your broker suggests that you add a venture capital fund to your current portfolio. The venture capital fund has an expected return of 20%, a volatility of 19%, and a correlation of 0.6 with the Tanglewood Fund. Calculate the required return that make venture capital fund an attractive addition O a. 20.37% O b. 10.11% c. 7.10% O d. 13.03%
In addition to risk free securities, you are currently invested in the Tanglewood Fund, a broad-based fund of stocks and other securities with an expected return of 14% and a volatility of 24%. Currently, the risk-free rate of interest is 3%. Your broker suggests that you add a venture capital fund to your current portfolio. The venture capital fund has an expected return of 20%, a volatility of 79%, and a correlation of 0.2 with the Tanglewood Fund, Assume you follow your broker's advice and put 50% of your money in the venture fund: a. What is the Sharpe ratio of the Tanglewood Fund? b What is the Sharpe ratio of your new portfolio?c. What is the optimal Sharpe ratio you can obtain by investing in the venture fund? (Hint: Use Excel and tourid your answer to three decimal places.)
You are currently only invested in the Natasha Fund (aside from risk-free securities). It has an expected return of 14% with a volatility of 20%. Currently, the risk-free rate of interest is 3.8%. Your broker suggests that you add Hannah Corporation to your portfolio. Hannah Corporation has an expected return of 20%, a volatility of 60%, and a correlation of 0 with the Natasha Fund. Is your broker right? You follow your broker’s advice and make a substantial investment in Hannah stock so that, considering only your risky investments, 60% is in the Natasha Fund and 40% is in Hannah stock. When you tell your finance professor about your investment, he says that you made a mistake and should reduce your investment in Hannah. Is your finance professor right? You decide to follow your finance professor’s advice and reduce your exposure to Hannah. Now Hannah represents 15% of your risky portfolio, with the rest in the Natasha fund. Is this the correct amount of Hannah stock to hold?…
You are working on creating a portfolio that mimics a fully diversified market index.Assume that you have $1 million fund to invest. You plan to allocate $195,000 and $365,000of your fund to invest in stock A and B, respectively. To achieve your goal, you need to add anadditional risky stock C and a risk-free bond to your portfolio. How much would you invest instock C and risk-free bond?
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}: Forecasted Return CAPM Beta Fund T 9.00% 1.20 Fund U 10.00% 0.80 a. If the risk-free rate is 3.9 percent and the expected market risk premium (£(RM) -RFR} is 6.1 percent, calculate the expected return for each mutual fund according to the CAPM. b. Using the estimated expected returns from part (a) along with your own 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?
You create a portfolio consisting of $23000 invested in a mutual fund with beta of 1.3, $25000 invested in Treasury Securities (assume risk-free), and $12000 invested in an index fund tracking the market. According to surveys, the expected market risk premium is 6.6%, Risk-free rate is 1.3%. What is the expected return of this portfolio according to CAPM?
You are working on creating a portfolio that mimics a fully diversified market index. Assume that you have $1 million fund to invest. You plan to allocate $195,000 and $365,000 of your fund to invest in stock A and B, respectively. To achieve your goal, you need to add an additional risky stock C and a risk-free bond to your portfolio. Assume that betas for stock A, B, and C are 0.80, 1.09, and 1.23, respectively. How much would you invest in stock C and risk-free bond?
Assume that you are the portfolio manager of the SF Fund, a $3 million hedge fund that contains the following stocks. The required rate of return on the market is 11.00% and the risk-free rate is 5.00%. What rate of return should investors expect (and require) on this fund? (Hint: first calculate the weights, then calculate the beta of the portfolio and then calculate the required return of the portfolio.) Show your work. Stock Amount Weights Beta A $1,075,000 ? 1.20 B 675,000 ? 0.50 C 750,000 ? 1.40 D 500,000 ? 0.75 $3,000,000
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 9.0% 10.0 CAPM Beta 1.20 0.80 a) If the risk-free rate is 3.9 % and the expected market risk premium is 6.1%, calculate the expected return for each mutual fund according to the CAPM. b) Using the estimated expected returns from Part a along with your own return forecasts, explain 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. Are Funds T and U overvalued, undervalued, or properly valued?

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