(b)Despite the world's promising economic condition, she believes that the domestic market is stillunstable and anticipates it to continue a downtrend till mid of year 2020. The investment analystinformed her that the investment fund in the following:Khadijah was the top fund manager who manages an equity portfolio at Bank Islam Berhad.Number of ShareEconomic Condition Price per UnitRecessionBetaRM1,228.8818,08016,0709,6001.59NormalRM838.502.01ВoomRM450.890.65The current Treasury Bill is 9.2 percent and market portfolio is 13.7 percent. Based on theinformation above:i. Calculate the required rate of return.ii. Khadijah has analyzed that there are several risk factors that drive the return on the share marketas follows:Risk FactorInvestmentPandemic7.8Oil PriceGDPInflationMarket return (%)4.435.25.5Beta1.210.91.872.6The risk-free rate is 3.98 percent, calculate the required rate of return on the share.

i) Market return (Rm) = 13.7% Risk free rate (Rf) = 9.2%

Khadijah was the top fund manager who manages an equity portfolio at Bank Islam Berhad. Despite the world's promising economic condition, she believes that the domestic market is still unstable and anticipates it to continue a downtrend till mid of year 2020. The investment analyst informed her that the investment fund in the following: (b) Economic Condition Price per Unit Recession Number of Share Beta RM1,228.88 1.59 18,080 16,070 9,600 Normal RM838.50 2.01 0.65 Вoom RM450.89 The current Treasury Bill is 9.2 percent and market portfolio is 13.7 percent. Based on the information above: i. Calculate the required rate of return. ii. Khadijah has analyzed that there are several risk factors that drive the return on the share market as follows: Risk Factor Investment Pandemic 7.8 Oil Price GDP Inflation Market return (%) 5.5 1.87 4.43 5.2 Beta 1.21 0.9 2.6 The risk-free rate is 3.98 percent, calculate the required rate of return on the share.

Khadijah was the top fund manager who manages an equity portfolio at Bank Islam Berhad. Despite the world's promising economic condition, she believes that the domestic market is still unstable and anticipates it to continue a downtrend till mid of year 2020. The investment analyst informed her that the investment fund in the following: (b) Economic Condition Price per Unit Recession Number of Share Beta RM1,228.88 1.59 18,080 16,070 9,600 Normal RM838.50 2.01 0.65 Вoom RM450.89 The current Treasury Bill is 9.2 percent and market portfolio is 13.7 percent. Based on the information above: i. Calculate the required rate of return. ii. Khadijah has analyzed that there are several risk factors that drive the return on the share market as follows: Risk Factor Investment Pandemic 7.8 Oil Price GDP Inflation Market return (%) 5.5 1.87 4.43 5.2 Beta 1.21 0.9 2.6 The risk-free rate is 3.98 percent, calculate the required rate of return on the share.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Your Company, manager of the Gigantic Mutual Fund, knows that her fund currently is well diversified and that it has a CAPM beta of 1.0 The risk-free rate is 8% and the CAPM risk premium of 6.2%. She has been learning about measures of risk and knows that there are (at least) two factors: changes in industrial production index, δ1 and unexpected inflation, δ2 The APT equation is E(Ri) – Rf = [δ1 – Rf]bi1 + [δ2 – Rf]bi2, E(Ri) = 0.08 + [0.05]bi1 + [0.11]bi2. Required If his portfolio currently has a sensitivity to the first factor of bi1= -0.5, what is its sensitivity to unexpected inflation?
Your Company, manager of the Gigantic Mutual Fund, knows that her fund currently is well diversified and that it has a CAPM beta of 1.0 The risk-free rate is 8% and the CAPM risk premium of 6.2%. She has been learning about measures of risk and knows that there are (at least) two factors: changes in industrial production index, δ1 and unexpected inflation, δ2 The APT equation is E(Ri) – Rf = [δ1 – Rf]bi1 + [δ2 – Rf]bi2, E(Ri) = 0.08 + [0.05]bi1 + [0.11]bi2. Required If she rebalances her portfolio to keep the same expected return but reduce her exposure to inflation to zero (i.e., bi1= 0) what will its sensitivity to the first factor become?
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Ingabire is a portfolio manager for the Nyamata Fund, a core large-cap equity fund. The market proxy and benchmark for performance measurement purposes is the S&P 500. Although the Nyamata portfolio generally mirrors the asset class and sector weightings of the S&P, Ingabire is allowed a significant amount of leeway in managing the fund. His portfolio holds only stocks found in the S&P 500 and cash. Ingabire was able to produce exceptional returns last year (as outlined in the table below) through his market-timing and security selection skills. At the outset of the year, he became extremely concerned that the combination of a weak economy and geopolitical uncertainties would negatively impact the market. Taking a bold step, he changed his market allocation. For the entire year his asset class exposures averaged 50% in stocks and 50% in cash. The S&P’s allocation between stocks and cash during the period was a constant 97% and 3%, respectively. The risk-free rate of…
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