What alpha do the informed traders? make

Assignment Help Finance Basics
Reference no: EM133332049

Question: Assume the economy consists of three types of people. 45% are fad? followers,

51% are passive investors who hold the market? portfolio, and 4% are informed traders. The portfolio consisting of all the informed traders has a beta of 1.53 and an expected return of 15%. The market expected return is 10%. The? risk-free rate is 4%.

a. What alpha do the informed traders? make?

b. What is the expected return of the fad? followers?

c. What alpha do the fad followers? make

 

Reference no: EM133332049

Questions Cloud

What is nominal required rate of return for similar project : Calculate the Thai Bhat (Bt) value of this investment proposal from the local (Thai) point of view. What is the nominal required rate of return for similar
Discusses wisdom in relation to trials : James discusses wisdom (see vv. 5-8 and 16-18) in relation to trials (vv. 2-5 and 12-15), the rich and poor (vv. 9-11), speech
What is the equity cost of capital for? carmax : What is the equity cost of capital for? CarMax? What would be? CarMax's equity cost of capital if they had the? industry-average level of? debt?
What ways are these gods different from christian god : Provide a description of the nature of the gods as it emerges from the reading of Metamorphoses. In what ways are these gods different from the Christian God?
What alpha do the informed traders? make : What alpha do the informed traders? make? What is the expected return of the fad? followers? What alpha do the fad followers? make
Description of nature of the gods : Provide a description of the nature of the gods as it emerges from the reading of Metamorphoses.
Define and evaluate a portfolio insurance strategy : Define and evaluate a portfolio insurance strategy for a stock portfolio currently worth $10 million. Assume that an S&P 500 Put option is available
How have you heard god general calling in your life : Have you ever read Scripture in the workplace? What was that experience like? How have you heard God's general calling in your life?
Calculate the npv of the contract : Calculate the NPV of the contract. Calculate the maximum amount that you would pay to delay the purchase of the equipment subject to receiving the contract.

Reviews

Write a Review

Finance Basics Questions & Answers

  In the finance textbook by cornett adair and nofsinger

in the finance textbook by cornett adair and nofsinger discusses various criteria for calculating and analyzing the

  Define the behavior of investors from different cultures

The sections on the endowment effect and biased self-attribution cited recent research on differing influences dependent on cultural background.

  How you could apply the 3-step approach

What are example of how you could apply the 3-Step Approach to solve an ethical problem you are experiencing at work or have experienced at work

  How many orders will be placed each year

Cheesburger and Taco Company purchases 15,156 boxes of cheese each year. How many orders will be placed each year?

  Why do organizations have budgets

1. Why do organizations have budgets? 2. Why did Borealis decide to abandon budgets?

  What is the expected price of the stock

Gordon & Co.'s stock has just paid its annual dividend $1.10 per share. Analysts believe that Gordon will maintain its historic dividend growth rate of 3%.

  What was the cash flow per io share

In the first month, the total payments from the pool were $467.5 thousand. What was the cash flow per IO share (to the nearest dollar)? Assume no defaults.

  Describe an incentive conflict in your company

Describe an incentive conflict in your company. What is the source of the conflict, and how is it being controlled? Could you control it in a less costly way?

  Provide justifications for increase to discretionary account

From the e-Activity, provide three justifications for an increase to the four highest discretionary spending accounts.

  What credit exposure does the bank have

A bank's derivatives transactions with a counterparty are worth +$10 million to the bank and are cleared bilaterally. The counterparty has posted $10 million.

  What is the current yield

ABC has issued a $1000 par bond with 15 years to maturity. The bond is currently quoted at 116.4% of par value. The bond pays a semi-annual coupon of $47.

  Verify that the variance of the sample 4 9 3 6 4 and 7 is

verify that the variance of the sample 4 9 3 6 4 and 7 is 5.1 and using this fact along with the results of exercise

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd