Q: Booher Book Stores has a beta of 0.8. The yield on a 3-month T-bill is 4%,and the yield on a 10-year…
A: Beta = 0.80 Risk free rate = 6% Market risk premium = 5.50%
Q: The analysts at FNB forecasted that the return on DJIA index portfolio over the coming year will be…
A: The degree of risk aversion of the average investors can be denoted as Beta. Variance of returns…
Q: a mutual fund manager expects her portfolio to earn a rate of return of 11 percent this year. The…
A: Financial management consists of directing, planning, organizing and controlling of financial…
Q: Leah Vine has gathered the following information of three Mutual Funds (MFs). The beta risks of the…
A: As per CAPM Required return = risk free rate + beta * (market return - risk free rate)
Q: Suppose the returns on a small stock are normally distributed. The historical average return is 18…
A: a) Z score = (expected return - actual return) / Standard Deviation Z score = (18%-12%)/6% Z score =…
Q: Suppose a bond fund has an initial portfolio value of $100 million. The following table provides the…
A: Doller weighted return Doller weighted rate of return is a measure to identify the performance of an…
Q: To create a delta-neutral portfolio, the SIT fund has sold 10,000 put options on Epsilon stock with…
A: Black Scholes Model is one of the model which is based on mathematical derivation so that prices of…
Q: ver the past 3 years, your stock fund earned returns of 10%, -8%, and 12
A: Solution:- Average annual compound rate means the average of the returns earned in the various…
Q: A portfolio returned 11% last year, 2% better than the market return of 9%. the portfolio’s return…
A: Sharpe ratio = (Mean portfolio return − Risk-free rate)/Standard deviation of portfolio return
Q: The rate of return on General Electric common stock over the coming year is normally distributed…
A: To find the Probability of Negative return Firstly one has to find the z Value.
Q: gamma fund had return of 16%, a beta of 1.6, and a standard deviation of 29% last year when T-bills…
A: Sharp ratio = (return of potfolio - risk free rate)/ Standard deviation
Q: a) The stock market of country A has an expected return of 5 percent, and standard deviation of…
A: The expected return and standard deviation of a portfolio: The expected return of a portfolio is the…
Q: A mutual fund generates a 11.9 percent return. During the same period, the market rose by 7.4…
A: GIVEN, MF generated return = 11.9%rf=3.5%rm=7.4%beta= 1.4
Q: Electric fund had expected return of 15% and standard deviation for this return is 26%. Beta and…
A: Expected return (Re) = 15% Risk free rate (Rf) = 4% Standard deviation (SD) = 26%
Q: A stock’s returns for the past 3 years were 10%, 215%, and 35%.What is the historical average…
A: Working note:
Q: The risk-free rate of interest is 5% and the market risk premium is 8%. Miller Corporation has a…
A: We can determine the required return on stock using Capital Asset Pricing Model. CAPM formula:…
Q: Over a certain period, large-company stocks had an average return of 12.19 percent, the average…
A: Risk free rate = 2.50% Return on small-company stocks = 17.13%
Q: A portfolio with a 25% standard deviation generated a return of 15% last year when T-bills were…
A: Given: Standard deviation 25%= 0.25 Average yearly return is 15%= 0.15 And T-bill of 4.5℅= 0.045
Q: You find a certain stock that had returns of 13.2 percent, –21.6 percent, 27.6 percent, and 18.6…
A: The formula used is shown:
Q: The risk free rate is 2% and the expected return on the market is 8% . Lexington fund has expected…
A: treynor ratio = (expected return - risk free rate) / beta
Q: You are considering investing in a mutual fund. The fund is expected to earn a return of 19.0…
A: Given, Expected return= 19% Standard deviation = 10.3%
Q: Suppose that Morningstar reports that a mutual fund has earned an alpha of 2.0% per year on average…
A: Market efficiency refers to how effectively current prices represent all accessible, relevant…
Q: You are considering investing in a mutual fund. The fund is expected to earn a return of 15 percent…
A: Given, The return is 15% The standard deviation SD is 5.1 percent
Q: Vega fund had return of 12%, a beta of 1.2, in a standard deviation of 25% last year t bills…
A: Vega fund had return of 12%, a beta of 1.2, in a standard deviation of 25% last year t bills…
Q: What is the standard deviation of the returns of a portfolio that produced returns of -14%, 30%, and…
A: Standard Deviation is the square root of the Square of Deviation from the mean return divided by the…
Q: You find a certain stock that had returns of 15 percent, -22 percent, 23 percent, and 10 percent for…
A: Average return = total return for total period/ total period
Q: Two common stocks, Consolidated Edison and Apple, have the following expected return and standard…
A: Given:
Q: Your portfolio has provided you with returns of 8.6 percent, 14.2 percent, -3.7 percent, and 12.0…
A: The rate of return that an investor is earning from a particular investment in a particular time…
Q: Vega fund had return of 14%, a beta of 0.9, in a standard deviation of 27% last year 20 bills…
A: Ratio is a tool which is used to measure the firm’s performance or growth by establishing a relation…
Q: Consider a no - load mutual fund with $ 500 million in assets , 50 million in debt , and 12 million…
A: Solution detail at the start of the year asset $500 million Solution Step (1) Debt $50 million Share…
Q: Consider a stock where the current price is Ksh.120, the expected return is 20% per annum, and the…
A: The question is based on the concept of probability distribution over a year in continuous…
Q: Consider three investments. You are given thefollowing means, standard deviations, and correlations…
A: Portfolio variance is a measurement of risk, of how the aggregate actual returns of a set of…
Q: In a particular year, Hoosier Mutual Fund earned a return of 1% by making the following investments…
A: Portfolio is a bundle of various assets or investments, investors invest the money in different…
Q: Security F has an expected return of 10 percent and a standard deviation of 43 percent per year.…
A: given, rf=10%σf=43%rg=15%σg=62%wf=0.3wg=0.7
Q: Assume that you bought 200 stock B in your portfolio for total investment of $1200, now the market…
A: Capital gain is the determination of any profits or gains arises out of sale or transfer of any…
Q: During the year just ended, Anna Schultz's portfolio, which has a beta of 0.97, earned a return of…
A: Treynor's Ratio = (Average rate of portfolio-risk free rate)/Beta of the portfolio
Q: The Company has over the years spread their funds in this order: 30% stock in A, 50% stock in B and…
A: Standard deviation of a three asset portfolio can be computed by using the following formula: Here,…
Q: The table below contains records of rates of return for a mutual fund F and for the market portfolio…
A:
Q: The table given below reports last five years data on annual rates of return (HPYS) on two stocks…
A: Athematic mean is average of returns
Q: The last four years of returns for a stock are as follows: Year 3 4 Return - 4.3% 28.1% 12.3% 3.9%…
A: Year Return 1 -4.3% 2 28.1% 3 12.3% 4 3.9%
Q: An investment portfolio has equal proportions invested in five stocks. The expected returns and…
A: Investment portfolio : No. of stocks : 5 Weights : equal or 100%/5 = 20% or 0.2 for each stock…
Q: you are an active investor in the securities market and you have established an investment portfolio…
A: Expected Return of Portfolio is the loss or profit anticipated by an investor on a portfolio that…
Q: J.P. Morgan Asset Management publishes information about financial investments. Overthe past 10…
A: Note: It is a situation where multiple subparts have been asked and no sub-part is specified to…
Q: portfolio had a Sharpe measure of ___
A: The risk-return ratio is known as the Sharpe Ratio. It is a measure of return generated over and…
Q: The following table contains monthly returns for Cola Co. and Gas Co. for 2010 E (the returns are…
A: To calculate standard deviation of each stock excel function STDEV.S is used. Standard deviation of…
Risk and return
Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.
Capital Asset Pricing Model
Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
Mutual Fund A returns 13% over the past year and had a standard deviation of 11%. The risk free
return over the time period is 4%. What is the Sharpe Ratio?
Step by step
Solved in 2 steps
- Vega fund had return of 14%, a beta of 0.9, in a standard deviation of 27% last year 20 bills generated 3%. At the same time, the market portfolio generated return of 13% and the standard deviation of 22%. What is the information ratio of Vega fund ?During the past 5-year, the monthly average return and standard deviation of Netflix (NFLX) stock were 3.5% and 10%, respectively. For the same period, the monthly average return and standard deviation of Verizon (VZ) were 0.6% and 4.6%, respectively. The correlation between NFLX and VZ was -0.1. Assume that the monthly risk-free rate is 0.1%. ) What is the Sharpe ratio for NFLX? What is the Sharpe ratio for VZ? Show your calculation steps briefly and clearly. Find the minimum-variance portfolio (MVP), i.e., the weight of NFLX and VZ in the MVP. You do not need to show your calculation steps for this subquestion. Find the optimal risky portfolio P*, i.e., the weight of NFLX and VZ in P*. You do not need to show your calculation steps for this subquestion. Calculate the Sharpe ratio for the optimal risky portfolio P*. Verify that P* offers a higher Sharpe ratio than NFLX and VZ.gamma fund had return of 16%, a beta of 1.6, and a standard deviation of 29% last year when T-bills generated 3%. What is the Sharpe ratio of gamma fund.
- The returns on a portfolio over the last five years were: -5.2 percent, 21.6 percent, 4.5 percent, 11.7 percent, and 5.9 percent. What is the standard deviation of these returns?A mutual fund has an average annual return of 18% with a Standard Deviation of 36%. What is the likelihood of earning more than 60% in any given year? 17% 88% 1.17% 12% none of the aboveA portfolio with a 25% standard deviation generated a return of 15% last year when T-bills were paying 4.5%. This portfolio had a Sharpe ratio of ____.
- Suppose that Morningstar reports that a mutual fund has earned an alpha of 2.0% per year on average over the last five years. Is this a violation of market efficiency?The stock of Jones Trucking is expected to return 16 percent annually with a standard deviation of 7 percent. The stock of Bush Steel Mills is expected to return 21 percent annually with a standard deviation of 13 percent. The correlation between the returns from the two securities has been estimated to be +0.4. The beta of the Jones stock is 1.1, and the beta of the Bush stock is 1.4. The risk-free rate of return is expected to be 6 percent, and the expected return on the market portfolio is 16 percent. The current dividend for Jones is $5. The current dividend for Bush is $7. What is the expected return from a portfolio containing the two securities if 30 percent of your wealth is invested in Jones and 70 percent is invested in Bush? Round your answer to one decimal place. % What is the expected standard deviation of the portfolio of the two stocks? Round your answer to two decimal places. % Which stock is the better buy in the current market? Round your answers to one decimal…The stock of Jones Trucking is expected to return 16 percent annually with a standard deviation of 7 percent. The stock of Bush Steel Mills is expected to return 21 percent annually with a standard deviation of 13 percent. The correlation between the returns from the two securities has been estimated to be +0.4. The beta of the Jones stock is 1.1, and the beta of the Bush stock is 1.4. The risk-free rate of return is expected to be 6 percent, and the expected return on the market portfolio is 16 percent. The current dividend for Jones is $5. The current dividend for Bush is $7. What is the expected return from a portfolio containing the two securities if 30 percent of your wealth is invested in Jones and 70 percent is invested in Bush? Round your answer to one decimal place. % What is the expected standard deviation of the portfolio of the two stocks? Round your answer to two decimal places. % Which stock is the better buy in the current market? Round your answers to one decimal…
- In a particular year, Salmon Arm Mutual Fund earned a return of 16% by making the following investments in asset classes: Weight return Bonds 20% 12% stocks 80% 17% The return on a bogey portfolio was 12%, based on the following: Weight Return Bonds(aggregate bond index) 60% 10% Stocks (S&P 500 index) 40% 15% The total excess return on the managed portfolio was __________.%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 38% 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 with weights as shown below. (Enter your answers as decimals rounded to 4 places. Leave no cells blank - be certain to enter "0" wherever required.) WBills: WIndex: Expected Return: Variance: 0.0 1.0 0.1300 0.1444 Example 0.2 0.8 0.4 0.6 0.6 0.4 0.8 0.2 1.0 0.0A portfolio with a 25% standard deviation generated a return of 15% last year when T-bills were paying 4.5%. This portfolio had a Sharpe measure of ____.