Answered: The Manhawkin Fund has an expected…

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

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter8: Risk And Rates Of Return

Section: Chapter Questions

Problem 2PROB

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Concept explainers

Portfolio Management

Portfolio management is the process by which an investor decides that how the person will invest in a variety of assets in order to get a desired return in the future. A portfolio means a pool of assets that includes securities, bonds, and other investment instruments which helps in risk minimization of the money that has been invested. In other words, it can be said that a portfolio means a combination of assets in which an investor decides to invest their money in order to get a lump sum return in the future or even a series of cash flow that the person is expecting at the end of their job life.

Question

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

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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.