Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Chapter 4, Problem 14PS
Reconsider the Fingroup Fund in the previous problem. 1f during the year the
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3. The composition of a "BestFund" is as follows: Shares Share price 200,000 300,000 400,000 600,000 Stock A B C D 35 40 20 25 a. The fund's accrued management fee with the portfolio manager currently totals $30,000. There are 4 million shares outstanding. What is the net asset value of the fund? b. If during the year the portfolio manager sells all of the holdings of stock D and replaces it with 200,000 shares of stock E at $50 per share and 200,000 shares of stock F at $25 per share, what is the portfolio turnover rate?
Suppose that every time a fund manager trades stock, transaction costs such as commissions and bid–ask spreads amount to 2.8% of the value of the trade. If the portfolio turnover rate is 50%, by how much is the total return of the portfolio reduced by trading costs? (Round your answer to 1 decimal place.)
Suppose that every time a fund manager trades stock, transaction costs such as commissions and bid-ask spreads amount to 0.5% of
the value of the trade.
If the portfolio turnover rate is 55%, by how much is the total return of the portfolio reduced by trading costs? (Round your answer to 2
decimal places.)
Reduction in portfolio returns
%
Chapter 4 Solutions
Essentials Of Investments
Ch. 4 - Prob. 1PSCh. 4 - Prob. 2PSCh. 4 - Prob. 3PSCh. 4 - Prob. 4PSCh. 4 - Prob. 5PSCh. 4 - Prob. 6PSCh. 4 - Prob. 7PSCh. 4 - Prob. 8PSCh. 4 - Prob. 9PSCh. 4 - Prob. 10PS
Ch. 4 - An open-end fund has a net asset value of $10.70...Ch. 4 - Prob. 12PSCh. 4 - The composition of the Fingroup Fund portfolio is...Ch. 4 - Reconsider the Fingroup Fund in the previous...Ch. 4 - Prob. 15PSCh. 4 - Prob. 16PSCh. 4 - Prob. 17PSCh. 4 - Loaded-Up Fund charges a 12b-1 fee of 1% and...Ch. 4 - City Street Fund has a portfolio of $450 million...Ch. 4 - Prob. 20PSCh. 4 - Prob. 21PSCh. 4 - Prob. 22PSCh. 4 - Prob. 23PSCh. 4 - Prob. 24PSCh. 4 - Prob. 25PSCh. 4 - Prob. 26PSCh. 4 - Prob. 27PSCh. 4 - You expect a tax-free municipal bond portfolio to...Ch. 4 - Prob. 29PSCh. 4 - Prob. 30CCh. 4 - Prob. 1WMCh. 4 - Prob. 2WMCh. 4 - Prob. 3WM
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- Suppose at the start of the year, a no-load mutual fund has a net value of RM27.15 per share. During the year, it pays its shareholders a capital gain and dividend distribution of RM1.12 per share and finishes the year with NAV of RM30.34. Required: a. b. If at the end of the year, the fund is selling is selling at 5% discount, what is the rate of return? C. What is the return to an investor who holds 2000 shares of this fund in his retirement account? d. Differentiate between open end and closed end funds. Assume at the end of year, the company change its policy and charge. 12b-1 fees of 2%, What is the rate of return?arrow_forward1. A fund is set up to charge a load. Its net asset value is P16.50 and its offer price is P17.30. A. Assume the fund increased in value by .30 the first month after you purchased 100 shares. What is the total gain or loss? Compare the total current value with the total purchase amount. B. By what percentage would the net asset value of the shares have to increase for you to break even?arrow_forwardThe composition of the Fingroup Fund portfolio is as follows: Stock Shares Price A 200,000 $ 39 B 284,000 32 C 408,000 28 D 680,000 35 During the year the portfolio manager sells all of the holdings of stock D and replaces it with 200,000 shares of stock E at $50 per share and 230,000 shares of stock F at $60 per share. What is the portfolio turnover rate? (Round your answer to 1 decimal place.)arrow_forward
- The composition of the Fingroup Fund portfolio is as follows: Stock Shares Price A 200,000 $ 35 B 288,000 34 C 406,000 26 D 660,000 25 During the year the portfolio manager sells all of the holdings of stock D and replaces it with 15,000 shares of stock E at $90 per share and 202,000 shares of stock F at $75 per share. Required: What is the portfolio turnover rate? Note: Round your answer to 1 decimal place. Turnover rate %arrow_forwardThe composition of the Fingroup Fund portfolio is as follows: Price $ 41 37 23 40 Stock A B C Shares 200,000 294,000 403,000 630,000 During the year the portfolio manager sells all of the holdings of stock D and replaces it with 200,000 shares of stock E at $60 per share and 220,000 shares of stock F at $60 per share. What is the portfolio turnover rate? (Round your answer to 1 decimal place.) Turnover rate %arrow_forwardThe composition of the Fingroup Fund portfolio is as follows: Stock Shares Price A 280,000 $ 35 B 380,000 40 C 480,000 15 D 680,000 20 If during the year the portfolio manager sells all of the holdings of stock D and replaces it with 170,000 shares of stock E at $50 per share and 170,000 shares of stock F at $30 per share, what is the portfolio turnover rate? (Round your answer to 2 decimal places.)arrow_forward
- Suppose that every time a fund manager trades stock, transaction costs such as commissions and bid–ask spreads amount to .4% of the value of the trade. If the portfolio turnover rate is 50%, by how much is the total return of the portfolio reduced by trading costs?arrow_forwardWhat makes for a good investment? Use the approximate yield formula or a financial calculator to rank the following investments according to their expected returns. Buy a stock for $30 a share, hold it for three years, and then sell it for $60 a share (the stock pays annual dividends of $2 a share). Buy a security for $40, hold it for two years, and then sell it for $100 (current income on this security is zero). Buy a one-year, 5 percent note for $1,000 (assume that the note has a $1,000 par value and that it will be held to maturity).arrow_forward4. Mutual fund ABC's year-end net asset value (NAV) in the past two years are Year NAV 2020 17.5 2021 18.9 2022 19.5 This mutual fund pays $0.5 dividend per share at the end of every year. (a). Stanley purchased 1000 shares of fund ABC at the end of 2020 and sold the 1000 shares at the end of 2022. What was the Stanley's average annual return over the two years? (b). John purchased 500 shares of fund ABC at the end of 2020, sold 280 shares at the end of 2021 and sold the remaining 220 shares at the end of 2022. What was the John's average annual return over the two years?arrow_forward
- 1. A fund manager is holding the following stocks: Stock Amount Invested Beta 1 $300 million 1.2 2 560 million 1.4 3 320 million 0.7 4 230 million 1.8 The risk-free rate is 5 percent and the market risk premium is also 5 percent. If the manager sells half of her investment in Stock 2 ($280 million) and puts the money in Stock 4, by how many percentage points will her portfolio’s required return increase? Group of answer choices 2.00% 0.4% 0.2% 0.22% 2. AlphaGet is currently assessing the value of its securities and have obtained the following information that should provide AlphaGet with the necessary information to estimate the value of its securities: Current long-term government securities carry a yield of 6.5% which includes an inflation premium of 1.25% Based on the credit rating of AlphaGet of BAA, the estimated credit spread of AlphaGet is at 2.5% Utilizing the work of an external expert, beta of AlphaGet is estimated at…arrow_forwardThe composition of the Fingroup Fund portfolio is as follows: Stock shares price A 200,000 $ 33 B 278,000 41 C 411,000 31 D 570,000 50 During the year the portfolio manager sells all of the holdings of stock D and replaces it with 200,000 shares of stock E at $60 per share and 220,000 shares of stock F at $75 per share. What is the portfolio turnover rate?arrow_forwardYou invest in a mutual fund that charges a 5% front-end load, 1% total annual fees, and a 2% back-end load, which decreases 0.5% per year. How much will you pay in fees on a $11,400 investment that does not grow if you cash out after 3 years of no gain? Question 3Answer a. $570 b. $786 c. $115 d. $944arrow_forward
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