International Financial Management
14th Edition
ISBN: 9780357130698
Author: Madura
Publisher: Cengage
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The estimated factor sensitivities of Alpha PLC to Fama-French factors and the risk premia associated with those factors are given in the table below:
Factor Sensitivity
Risk Premium (%)
Market factor
1.20
4.5%
Size factor
-0.50
2.7%
Value factor
-0.15
4.3%
Required:
1.Based on the Fama-French model, calculate the required return for Alpha PLC using these estimates. Assume that the Treasury bill rate is 4.7 percent.
2. Describe the expected style characteristics of Alpha PLC based on its factor sensitivities.
Qarshi Industries is a very well-profiled Company in financial markets of Pakistan. The company is confused about its investments during January effect. Help the company in estimating the risk and return of the company investments. For Qarshi Industries, the market and Stock J have the following probability distributions:
Probability
Rm
Rj
0.3
15%
10%
0.4
9%
5%
0.3
8%
12%
Calculate the expected rates of return for the market and Stock J.
Calculate the standard deviations for the market and Stock J.
Calculate the variance for the market and Stock J. Identify market anomaly, briefly discuss with example.
Differentiate between Average return and Geometric return, elaborate with the mathematical description of each
Which of the following refers to the Sharpe performance measure?
It measures the sensitivity of a national market to world market movements.
It shows an increase in the portfolio return at international level.
It reflects the increase in the portfolio return at domestic-equivalent risk level.
It estimates the excess return per standard deviation risk.
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