In addition to risk-free securities, you are currently invested in the Tanglewood Fund, a broadbased fund of stocks and other securities with an expected return of 12% and a volatility of 25%. Currently, the risk-free rate of interest is 3%. Your broker suggests that you add a venture capital fund to your current portfolio. The venture capital fund has an expected return of 20%, a volatility of 19%, and a correlation of 0.6 with the Tanglewood Fund. Calculate the required return that make venture capital fund an attractive addition a. 20.37% O b. 10.11% c. C. 7.10% O d. 13.03%
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- In addition to risk free securities, you are currently invested in the Tanglewood Fund, a broad-based fund of stocks and other securities with an expected return of 14% and a volatility of 24%. Currently, the risk-free rate of interest is 3%. Your broker suggests that you add a venture capital fund to your current portfolio. The venture capital fund has an expected return of 20%, a volatility of 79%, and a correlation of 0.2 with the Tanglewood Fund, Assume you follow your broker's advice and put 50% of your money in the venture fund: a. What is the Sharpe ratio of the Tanglewood Fund? b What is the Sharpe ratio of your new portfolio?c. What is the optimal Sharpe ratio you can obtain by investing in the venture fund? (Hint: Use Excel and tourid your answer to three decimal places.)In addition to risk-free securities, you are currently invested in the Tanglewood Fund, a broad-based fund of stocks and other securities with an expected return of 14% and a volatility of 24%. Currently, the risk-free rate of interest is 3%. Your broker suggests that you add a venture capital fund to your current portfolio. The venture capital fund has an expected return of 20%, a volatility of 79%, and a correlation of 0.2with the Tanglewood Fund. Assume you follow your broker's advice and put 50% of your money in the venture fund: a. What is the Sharpe ratio of the Tanglewood Fund?Answer (already calculated)= 0.458 b. What is the Sharpe ratio of your new portfolio?Answer (Already calculated)= 0.322 c. What is the optimal Sharpe ratio you can obtain by investing in the venture fund? (Hint: Use Excel and round your answer to three decimal places.)The optimal Sharpe ratio you can obtain by investing in the venture fund is *enter your response here* and the percentage in…You create a portfolio consisting of $23000 invested in a mutual fund with beta of 1.3, $25000 invested in Treasury Securities (assume risk-free), and $12000 invested in an index fund tracking the market. According to surveys, the expected market risk premium is 6.6%, Risk-free rate is 1.3%. What is the expected return of this portfolio according to CAPM?
- You create a portfolio consisting of $23000 invested in a mutual fund with beta of 1.3, $25000 invested in Treasury Securities (assume risk-free), and $12000 invested in an index fund tracking the market. According to surveys, the expected market risk premium is 6.6%, risk free rate is 1.3%. What is the expected return of this portfolio according to CAPM? Answer in percent, rounded to one decimal place.As an equity analyst, you have developed the following return forecasts and risk estimates for two different stock mutual funds (Fund T and Fund U}: Forecasted Return CAPM Beta Fund T 9.00% 1.20 Fund U 10.00% 0.80 a. If the risk-free rate is 3.9 percent and the expected market risk premium (£(RM) -RFR} is 6.1 percent, calculate the expected return for each mutual fund according to the CAPM. b. Using the estimated expected returns from part (a) along with your own return forecasts, demonstrate whether Fund T and Fund U are currently priced to fall directly on the security market line (SML), above the SML, or below the SML. c. According to your analysis, are Funds T and U overvalued, undervalued, or properly valued?You plan to invest in the Kish Hedge Fund, which has total capital of $500 million invested in five stocks: Stock Investment Stock's Beta Coefficient A $160 million 0.8 B 120 million 1.6 C 80 million 2.2 D 80 million 1.0 E 60 million 1.7 Kish's beta coefficient can be found as a weighted average of its stocks' betas. The risk-free rate is 4%, and you believe the following probability distribution for future market returns is realistic: Probability Market Return 0.1 -25% 0.2 0 0.4 12 0.2 29 0.1 51 1. What is the equation for the Security Market Line (SML)? (Hint: First determine the expected market return.) Select one (1) of the answers below. ri = 2.2% + (10.7%)bi ri = 4.0% + (9.2%)bi ri = 2.5% + (10.4%)bi ri = 4.0% + (10.7%)bi ri = 2.2% + (9.2%)bi Calculate Kish's required rate of return. Do not round intermediate calculations. Round your answer to two decimal places. ? % Suppose Rick Kish, the president, receives a proposal from a company…
- You plan to invest in the Kish Hedge Fund, which has total capital of $500 million invested in five stocks: Stock Investment Stock's Beta Coefficient A $160 million 0.7 B 120 million 1.4 C 80 million 2.1 D 80 million 1.0 E 60 million 1.4 Kish's beta coefficient can be found as a weighted average of its stocks' betas. The risk-free rate is 4%, and you believe the following probability distribution for future market returns is realistic: Probability Market Return 0.1 -26% 0.2 0 0.4 13 0.2 30 0.1 50 What is the equation for the Security Market Line (SML)? (Hint: First determine the expected market return.) ri = 5.7% + (9.6%)bi ri = 5.7% + (9.5%)bi ri = 4.0% + (9.6%)bi ri = 2.1% + (9.0%)bi ri = 4.0% + (9.5%)bi Calculate Kish's required rate of return. Do not round intermediate calculations. Round your answer to two decimal places. % Suppose Rick Kish, the president, receives a proposal from a company seeking new capital. The amount needed to take a…You plan to invest in the Kish Hedge Fund, which has total capital of $500 million invested in five stocks: Stock Investment Stock’s Beta Coefficient A $160 million 0.5 B 120 million 1.2 C 80 million 1.8 D 80 million 1.0 E 60 million 1.6 Kish’s beta coefficient can be found as a weighted average of its stocks’ betas. The risk-free rate is 6%, and you believe the following probability distribution for future market returns is realistic: Probability Market Return 0.1 –28% 0.2 0 0.4 12 0.2 30 0.1 50 (1)What is the equation for the Security Market Line (SML)? (Hint: First, determine the expected market return.) (2)Calculate Kish’s required rate of return. (3)Suppose Rick Kish, the president, receives a proposal from a company seeking new capital. The amount needed to take a position in the stock is $50 million, it has an expected return of 15%, and its estimated beta is 1.5. Should…As a mutual fund manager, you have a $40.00 million portfolio with a beta of 1.20. The risk-free rate is 3.25%, and the market risk premium is 7.00%. You expect to receive an additional $10.00 million which you plan to invest in additional stocks. After investing the additional funds, you want the fund's required and expected return to be 12.00%. What must the average beta of the new stocks be to achieve the target required rate of return? Do not round your intermediate calculations.