Problem 6-26 Suppose that the borrowing rate that your client faces is 11%. Assume that the Ss&P 500 index has an expected return of 16% and standard deviation of 23%. Also assume that the risk-free rate is re= 5%. Your fund manages a risky portfolio, with the following details: Elrp) = 13%, o, = 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? What about a client who is borrowing (y> 1)? (Negative values should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.) y < 1 y > 1
Problem 6-26 Suppose that the borrowing rate that your client faces is 11%. Assume that the Ss&P 500 index has an expected return of 16% and standard deviation of 23%. Also assume that the risk-free rate is re= 5%. Your fund manages a risky portfolio, with the following details: Elrp) = 13%, o, = 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? What about a client who is borrowing (y> 1)? (Negative values should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.) y < 1 y > 1
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 16P
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Transcribed Image Text:Problem 6-26
Suppose that the borrowing rate that your client faces is 11%. Assume that the Ss&P 500 index has an expected return of 16% and
standard deviation of 23%. Also assume that the risk-free rate is re= 5%. Your fund manages a risky portfolio, with the following details:
Elrp) = 13%, o, = 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? What about a
client who is borrowing (y> 1)? (Negative values should be indicated by a minus sign. Do not round intermediate calculations.
Round your answers to 2 decimal places.)
y < 1
y > 1
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