Use the following data: ret st.deviation beta Managed fund 22% 33% 1.2 Market 12% 22% 1...
Use the following data: ret st.deviation beta Managed fund 22% 33% 1.2 Market 12% 22% 1 Risk free rate 2% What is the M2 of the fund? Provide your answer in percent, rounded to two decimals, omitting the percent sign.
Homework Answers
As the question is not clear, we assume that we have to find Alpha of the fund
Given: Return on Managed Fund 22%, Standard Deviation on Managed Fund 33% Beta of Managed Fund 1.2
Return on Market 12%, Standard Deviation 22% Beta of Market 1
Risk Free Rate=2%
Using CAPM model
Re= Rf + (Rm-Rf) * Bp
where Rf is Risk Free Return, Rm is Return on Market and Bp is Beta of Portfolio
Re= 2%+(12%-2%)* 1.2
= 14%
Apha= Return of Portfolio- Re
= 22%-14%
= 8%
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