Homework Answers
risk adjusted required rate of return = risk free rate +(market return-risk free rate)*beta
risk adjusted required rate of return = 3+(9-3)*1.2 = 10.2%
risk and cost adjusted required rate of return = 10.2% + 1% = 11.2%
return earned = 11%
risk and cost adjusted return = 11%-11.2% = .2%
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14. Assume that you have...
Can you please provide the explanation for the answer if possible? Thank you! 0. To test...
Can you please provide the explanation for the answer if
possible? Thank you!
0. To test whether an investment strategy beats the market, you have to adjust the returns on the strategy for risk. Assume that you test a strategy and find that it makes excess returns after adjusting for risk using the CAPM (with beta used to measure risk). Which of the following conclusions could you draw? (3 points) a. The strategy beat the market during the testing period...
Can you please provide the explanation for the answer if possible. Thank you. 10. To test...
Can you please provide the explanation for the answer if
possible. Thank you.
10. To test whether an investment strategy beats the market, you have to adjust the returns on the strategy for risk. excess returns after adjusting for risk using the CAPM (with beta used t risk). Which of the following conclusions could you draw? (3 points) Assume that you test a strategy and find that it makes o measure a b. c The strategy beat the market during...
Please provide the explanation for the answer if possible? Thank you. Assume that you find an...
Please provide the explanation for the answer if possible?
Thank you.
Assume that you find an inefficiency in the market and a strategy to exploit it to make "excess" returns for yourself. Under which of the following conditions is that inefficiency likely to generate long standing profits? (3 points) 9. a If the inefficiency is difficult to spot and the trading strategy you use is b. If the inefficiency is difficult to spot and the trading strategy you use is...
Can you please provide the explanation for the answer if possible? Thank you! 13. You believe...
Can you please provide the explanation for the answer if
possible? Thank you!
13. You believe that small market-cap companies that are lightly held by institutions deliver much higher risk adjusted returns than the rest of the market. Which of the following would be the best test of this proposition? (3 points) Starting with a sample of all publicly traded companies today, find companies that have small market capitalizations and low institutional holdings today and estimate the returns you would...
Problem 7-03 You are an analyst for a large public pension Fund and you have been...
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can I please have answer with solutions? thank you! Stocks with higher market risk should have...
can I please have answer with solutions? thank you!
Stocks with higher market risk should have higher returns. True 40.) Aztec stock two times risky as the market on average. Given the market risk premium of 10%, a risk freera using CAPM what is the expected return of Aztec? 41.) You purchased a share of stock for $35.40 seven years ago, and sold it today for $58.37. No dividends were paid out of the seven years, but you did receive...
Er (%) 0.2 Consider the CAPM framework. Suppose that you currently have 40% of your wealth...
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Please answer the questions above. Thank you! You manage an index fund that is an exact...
Please answer the questions above. Thank you!
You manage an index fund that is an exact replica of the market index. The market expected annual rate of return is 19.5% with a standard deviation of 16.5%. Annual T-bill rate is 4.5% 2. a. A client of yours wants you to invest 80% of his portfolio in your fund and 20 % in T-bill money market fund. What is the expected return and standard deviation of this client's portfolio? b. What...
11. Assume that you have a strategy that has delivered an annual return of 12% a...
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Suppose that securities are priced according to the CAPM. You have forecast the correlation coefficient between...
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Can you please provide the explanation for the answer if
possible? Thank you!
0. To test whether an investment strategy beats the market, you have to adjust the returns on the strategy for risk. Assume that you test a strategy and find that it makes excess returns after adjusting for risk using the CAPM (with beta used to measure risk). Which of the following conclusions could you draw? (3 points) a. The strategy beat the market during the testing period...
Can you please provide the explanation for the answer if
possible. Thank you.
10. To test whether an investment strategy beats the market, you have to adjust the returns on the strategy for risk. excess returns after adjusting for risk using the CAPM (with beta used t risk). Which of the following conclusions could you draw? (3 points) Assume that you test a strategy and find that it makes o measure a b. c The strategy beat the market during...
Please provide the explanation for the answer if possible?
Thank you.
Assume that you find an inefficiency in the market and a strategy to exploit it to make "excess" returns for yourself. Under which of the following conditions is that inefficiency likely to generate long standing profits? (3 points) 9. a If the inefficiency is difficult to spot and the trading strategy you use is b. If the inefficiency is difficult to spot and the trading strategy you use is...
Can you please provide the explanation for the answer if
possible? Thank you!
13. You believe that small market-cap companies that are lightly held by institutions deliver much higher risk adjusted returns than the rest of the market. Which of the following would be the best test of this proposition? (3 points) Starting with a sample of all publicly traded companies today, find companies that have small market capitalizations and low institutional holdings today and estimate the returns you would...
Problem 7-03 You are an analyst for a large public pension Fund and you have been assigned the task of evaluating two different external portfolio managers (Yand 2). You consider the following historical average return, standard deviation, and CAPM beta estimates for these two managers over the past five years Portfolio Actual Avg. Return Standard Deviation Beta Manager Y 11.40 1.10 Manager 2 6.30% 8.50% 0.70 Additionally, your estimate for the risk premium for the market portfolio is 4.00 percent...
can I please have answer with solutions? thank you!
Stocks with higher market risk should have higher returns. True 40.) Aztec stock two times risky as the market on average. Given the market risk premium of 10%, a risk freera using CAPM what is the expected return of Aztec? 41.) You purchased a share of stock for $35.40 seven years ago, and sold it today for $58.37. No dividends were paid out of the seven years, but you did receive...
Er (%) 0.2 Consider the CAPM framework. Suppose that you currently have 40% of your wealth in Treasury Bills, risk-free, and 60% in the four assets below Asset i Bi Wi i = 1 8.5 0.2 0.1 i = 2 13.1 0.8 0.1 i = 3 16.6 1.2 0.2 i = 4 18.7 1.4 Let the four assets be traded in a market M with Erm = 15% and let the risk-free rate be rf = 4%, answer the following...
Please answer the questions above. Thank you!
You manage an index fund that is an exact replica of the market index. The market expected annual rate of return is 19.5% with a standard deviation of 16.5%. Annual T-bill rate is 4.5% 2. a. A client of yours wants you to invest 80% of his portfolio in your fund and 20 % in T-bill money market fund. What is the expected return and standard deviation of this client's portfolio? b. What...
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