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A risky fund has an expected return of 10% and a standard deviation of 18%. the T-Bill Rate is 5%. An Investor allocates 110% of her retirement portfolio to the risky fund and -10% to T-Bills (recall the negative allocations to T-ills indicates borrowing at the risk free rate) What is the investor's risk aversion coefficient? (PLEASE SHOW WORK!!)
A) 2.06 B) -0.71 C) 3.7 D) 1.40
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- If a fund has a return of 12% and a beta of 1.4, and if the risk-free rate is 2%, then what is its Treynor ratio O a. 7.14 Ob. 2.35 O c. 3.14 O d. 5.35a. What is the market risk premium (M-FRF)? Round your answer to two decimal places. % b. What is the beta of Fund P? Do not round intermediate calculations. Round your answer to two decimal places. c. What is the required return of Fund P? Do not round intermediate calculations. Round your answer to two decimal places. % d. Would you expect the standard deviation of Fund P to be less than 14%, equal to 14%, or greater than 14%? I. less than 14% II. greater than 14% III. equal to 14%4. Given a real rate of interest of 3.2%, an expected inflation premium of 5.1%, and risk premiums for investments A and B of 7.4% and 8.9% respectively, find the following: a. The risk-free rate of return, r; b. The required returns for investments A and B Review Only Click the icon to see the Worked Solution. a. The risk-free rate of return is %. (Round to one decimal place.) b. The required return for investment A is %. (Round to one decimal place.) The required return for investment B is %. (Round to one decimal place.)
- Suppose you have a medium risk-tolerance, and you want an annual return of $355. You decide to invest part in Fund A and the rest in Fund B. How much do you need to invest in Fund A? $ . Round to the nearest cent. Appreciate it thanks!!@@If a fund has a return of 12% and a standard deviation of 15%, and if the risk-free rate is 2%, then what is its Sharpe ratio O a. 0.667 O b. 0.235 O c. 0.435 O d. 0.0.237If a fund has a return of 10% and a beta of 1.5, and if the risk-free rate is 5%, and market return rate is 8%, calculate Jensen's Alpha O a. 0.5 O b. 1.4 O c. 0.65 O d. 0.42
- This question assumes the standard mean-variance utility function. A pension scheme offers investors two possible funds to invest in: a cash fund and a balanced fund. The cash fund offers a guaranteed return of 1.90%. The balanced fund offers an expected return of 5.50% with volatility 17.80%. What is the lowest level of risk-aversion that would cause an investor to choose the cash fund? 2.27 0.40 3.47 0.02Assume the risk-free rate is 4%. You are a financial advisor, and must choose one of the funds below to recommend to each of your clients. Whichever fund you recommend, your clients will then combine it with risk-free borrowing and lending depending on their desired level of risk. Expected Return Volatility Fund A 7% 3% Fund B 10% 4% Fund C 9% 4% Which fund would you recommend without knowing your client's risk preference?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 risk-free rate is currently 3.3%, and the market return is 14.8%. Assume you are considering the following investments: Investment Beta A 1.54 B 1.16 C 0.51 D 0.11 E 2.14 . a. Which investment is most risky? Least risky? b. Use the capital asset pricing model (CAPM) to find the required return on each of the investments. c. Find the security market line (SML), using your findings in part b. d. On the basis of your findings in part c, what relationship exists between risk and return? Explain.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 plan to invest in either a mutual fund X or mutual fund Y. The following information about the annual return (%) of each of these investments under different demand levels is available, along with the probability that each of these states of nature will OCcur: Demand Probability Fund X Fund Y High 0.4 30% 25% Medium 0.4 22% 34% low 0.2 17% 25% a) Compute expected return, standard deviation for each investment and covariance of the mutual fund X and mutual fund Y. b) Would you invest in the mutual fund X or Y? Explain. c) If you chose to invest in mutual fund X and the state of nature turns up to be the low demand, what do you think about the possibility of the opportunity loss of 8% in comparison to investing in mutual fund Y?
