Ms Rose wants to invest Rs 10 Mln in a fund indexed with S & P...
Ms Rose wants to invest Rs 10 Mln in a fund indexed with S & P 500. The continuous return and the continuous standard deviation of the S&P index has been 12% and 17% respectively for the last 60 years.
a. Calculate the probability of doubling the investment in 9 years by Ms Rose
b.Estimate the probability of incurring losses from the portfolio within 9 years.
You may apply following model adhering to standard deviation.Please state all the assumptions you may have with the answer.
Homework Answers
J. P. Morgan Asset Management publishes information about financial investments. Over the past 10 years, the...
3. P. Morgan Asset Management publishes information about financial investments. Over the past 10 years, the expected retum for the S&P 500 was 5.04 %with a standard deviation of 19.45 %and the expected return over that same period for a Core Bonds fund was 5.78 %with a standard deviation of 2.13 %(J. P. Morgan Asset Management, Guide to the Markets, 1st Quarter, 2012). The publication also reported that the correlation between the Sap 500 and Core Bonds is -0.32. You...
A pension fund manager is considering three mutual funds. The first is a stock fund, the...
A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a bond fund, and the third is a T-bill money market fund that yields a sure rate of 5.0%. The probability distributions of the risky funds are: (Total 20 points) Expected Return of Market Standard Deviation Stock funds (S) 15% 32% Bond funds (B) 9% 23% The correlation between the fund returns is 0.15. a. Use the formula below to compute the...
1. Consider historical data showing that the average annual rate of return on the S&P 500...
1. Consider historical data showing that the average annual rate of return on the S&P 500 portfolio over the past 85 years has averaged roughly 8% more than the Treasury bill return and that the S&P 500 standard deviation has been about 20% per year. Assume these values are representative of investors' expectations for future performance and that the current T-bill rate is 5%. Calculate the expected return and variance of portfolios invested in T-bills and the S&P 500 index...
1. Stock prices and stand-alone risk The S&P 500 Index is one of the most commonly...
1. Stock prices and stand-alone risk The S&P 500 Index is one of the most commonly used benchmark indices for the U.S. equity markets. Consisting of 500 companies, it is a market value-weighted index. This means that each company's performance is reflected in the index, weighted by the ratio of the company's value to the total value of all the companies. Based on your understanding of P/E ratios, in which of the following situations would the average trailing P/E ratio...
Suppose that the borrowing rate that your client faces is 10%. Assume that the S&P 500...
Suppose that the borrowing rate that your client faces is 10%. Assume that the S&P 500 index has an expected return of 15% and standard deviation of 21%. Also assume that the risk-free rate is rf = 4%. Your fund manages a risky portfolio, with the following details: E(rp) = 12%, σp = 18%. What is the largest percentage fee that a client who currently is lending (y < 1) will be willing to pay to invest in your fund?...
Suppose that the borrowing rate that your client faces is 9%. Assume that the S&P 500...
Suppose that the borrowing rate that your client faces is 9%. Assume that the S&P 500 index has an expected return of 16% and standard deviation of 24%. Also assume that the risk-free rate is rf = 3%. Your fund manages a risky portfolio, with the following details: E(rp) = 14%, σp = 15%. What is the largest percentage fee that a client who currently is lending (y < 1) will be willing to pay to invest in your fund?...
We were unable to transcribe this imageBledsoe Small-Cap Fund This fund primarily invests in small-capitalization stocks....
We were unable to transcribe this imageBledsoe Small-Cap Fund This fund primarily invests in small-capitalization stocks. As such, the returns of the fund are more volatile. The fund can also invest 10 percent of its assets in companies based outside the United States. This fund charges 1.70 percent in expenses. Bledsoe Large-Company Stock Fund This fund invests primarily in large- capitalization stocks of companies based in the United States. The fund is managed by Evan Bledsoe and has outperformed the...
Jennifer is interested in the mutual fund RBC U.S. Index Fund – Series A. She has...
Jennifer is interested in the mutual fund RBC U.S.
Index Fund – Series A. She has a few questions for
you before she buys this investment.
a) Does the reported fund’s return include the Management
Expense Ratio (MER) ? Yes or No
b) What type of fee is charged: No-load, Front-end load or a
Back-end load?
c) Is the status of this mutual fund classified as a closed-end
or open-end mutual fund?
d) Based on your response in c), explain...
A pension fund manager is considering three mutual funds. The first is a stock fund the second is...
A pension fund manager is considering three mutual funds. The first is a stock fund the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a sure rate of 5.5%. The probability distributions of th risky funds are The following data apply to Problems 8-12. Standard Deviation 32% 23 Expected Return 15% Stock fund (S Bond fund (B) The correlation between the fund returns is.15 8. Tabulate and draw...
Snowflake Inc.’s stock can return either -10% or 20% annually with equal probability, and Peloton Inc’s stock can return either -15% or 25% annually with equal probability. The correlation between Snowflake and Peloton’s stock returns is 0. You have $100
1. Snowflake Inc.’s stock can return either -10% or 20% annually with equal probability, and Peloton Inc’s stock can return either -15% or 25% annually with equal probability. The correlation between Snowflake and Peloton’s stock returns is 0. You have $100 to invest, and you decide to build a portfolio P which invests $50 in Snowflake and $50 in Peloton.a. What is Snowflake’s expected return?b. What is Snowflake’s standard deviation?c. What is portfolio P’s expected return?d. What is portfolio P’s...
1. Stock prices and stand-alone risk The S&P 500 Index is one of the most commonly used benchmark indices for the U.S. equity markets. Consisting of 500 companies, it is a market value-weighted index. This means that each company's performance is reflected in the index, weighted by the ratio of the company's value to the total value of all the companies. Based on your understanding of P/E ratios, in which of the following situations would the average trailing P/E ratio...
We were unable to transcribe this imageBledsoe Small-Cap Fund This fund primarily invests in small-capitalization stocks. As such, the returns of the fund are more volatile. The fund can also invest 10 percent of its assets in companies based outside the United States. This fund charges 1.70 percent in expenses. Bledsoe Large-Company Stock Fund This fund invests primarily in large- capitalization stocks of companies based in the United States. The fund is managed by Evan Bledsoe and has outperformed the...
Jennifer is interested in the mutual fund RBC U.S.
Index Fund – Series A. She has a few questions for
you before she buys this investment.
a) Does the reported fund’s return include the Management
Expense Ratio (MER) ? Yes or No
b) What type of fee is charged: No-load, Front-end load or a
Back-end load?
c) Is the status of this mutual fund classified as a closed-end
or open-end mutual fund?
d) Based on your response in c), explain...
A pension fund manager is considering three mutual funds. The first is a stock fund the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a sure rate of 5.5%. The probability distributions of th risky funds are The following data apply to Problems 8-12. Standard Deviation 32% 23 Expected Return 15% Stock fund (S Bond fund (B) The correlation between the fund returns is.15 8. Tabulate and draw...
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