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Part A) a mutual fund with beta of .8 has an expected rate of return of 14%. If the risk free rate =5%, and you expect the rate of return on the market portfolio to be 15%, should you invest in this fund? What is the fund's alpha?
Part B) What passive portfolio comprised of a market-index portfolio and a money market account would have the same beta as the fund? Show that the difference between the expected rate of retun on this passive portfolio and that of the fund equals the alpha from part a.
Discuss each of the following in the context of tactical asset allocation: The use of time series regression models for return forecasting, including examples of explanatory variables and Macedo's behavioural theory of return predictability
What are the benefits and potential risk factors for undertaking these derivative strategies in lieu of direct cash-oriented investments?
You have a residual risk aversion of lR = 0.12 and an information ratio of IR = 0.60. What is your optimal level of residual risk? What is your optimal value added?
a hedge fund has compiled a list of french firms that it believes will outperform the overall french stock market by 7
Explain and analyse what the investment bank adviser means if he says that such a bond will allow the investor to convert capital to income.
Calculate the tracking error for each manager relative to the index. Which manager did a better job of limiting his or her client's unsystematic risk exposure? Explain.
What are the Fama and Sortino portfolio performance measures, and what information do they provide beyond other measures? How can investment performance be measured by analyzing the security holdings of a portfolio?
Compute, under the pure expectations theory, the two-year implied forward rate three years from now, given the information provided in the preceding table.
Each portfolio holds about 100 names, with 90 names appearing in all the accounts and 10 names unique to the particular account. Roughly how much dispersion should you expect to see?
Calculate all the implied forward rates beginning after 6 months up till 24 months. Calculate the current value of Collin's bond portfolio. Calculate the duration of each of the bonds A, B, C and D
You are told that a company retains 80 percent of its earnings about 8 percent a year versus an average growth rate of 6 percent for all firms. Discuss whether you would consider this a growth company.
What economic functions do the forward and futures markets serve? How are forward and futures contracts valued after origination?
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