Homework Answers
| Solution : | ||
| Bid-ask Spread amount to 0.3% of the value of the trade | ||
| Portfolio Turnover rate is 45% | ||
| How much is the total return of the portfolio reduced by trading costs. | ||
| Reduced amount | = | Total Portfolio X total cost X Turnover rate |
| = | 2 X 0.3% X 45% | |
| = | 0.0027 | |
| = | 0.27% | |
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