a.
To determine: The better one of two bonds
Introduction: In long term bonds, the issuer pays higher interest rates for exchange of more security. The short term bonds have minimum period for maturity. But it provides high liquidity.
b.
To determine: The better one of the two bonds
Introduction: In long term bonds, the issuer pays higher interest rates for exchange of more security. The short term bonds have minimum period for maturity. But it provides high liquidity.
c.
To determine: The better one of two bonds
Introduction: In long term bonds, the issuer pays higher interest rates for exchange of more security. The short term bonds have minimum period for maturity. But it provides high liquidity.
d.
To determine: The better one of two bonds
Introduction: In long term bonds, the issuer pays higher interest rates for exchange of more security. The short term bonds have minimum period for maturity. But it provides high liquidity.
e.
To determine: The better one of two bonds
Introduction: In long term bonds, the issuer pays higher interest rates for exchange of more security. The short term bonds have minimum period for maturity. But it provides high liquidity.
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INVESTMENTS (LOOSELEAF) W/CONNECT
- A hedge fund charges the common 2 plus 20% fee structure, i.e. 2% management fee and 20% of any net (after management fees) profits. A pension fund invests in the hedge fund. In addition to the usual market risk from investing, what type of risk is faced by the pension fund manager investing in the hedge fund? Explain with respect to the hedge fund manager’s incentives.arrow_forwardAs the investment manager of the Oman investment fund, you wish to have a well-diversified international bond portfolio? What types of risks can be reduced by investing in such a portfolioarrow_forwardYou are a portfolio manager of a fund that focuses on fixed income securities. The financial year has come to an end and you have presented a report to your client on the performance of the fund. One of the bonds has a duration of 25 and a maturity of 15 years. The client has written an acknowledgement of the report and given a comment on the performance though the client believes that there is an error because the duration is greater than the maturity. What would be your advice to the client?arrow_forward
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- the federal fund is more effective than The banker’s acceptance in improving the economic growth. Assess the extent to which you agree with the statement with clarifying which one of these financial instruments you prefer to invest and why.arrow_forwardWhich of the following is most true? The nominal rate of a government long-term security can be used as a proxy for the real risk free rate. A direct relationship is exhibited between the investors’ willingness to supply funds and the interest rates of securities. Finance managers tend to favor more on long-term financing if the nation’s Gross Domestic Product is expected to contract. Maturity risk premium is always included in the nominal rate of any corporate security since corporations are perceived as less riskier than government.arrow_forward[The following information applies to the questions displayed below.] A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a sure rate of 5.5%. The probability distributions of the risky funds are: Expected Return Standard Deviation Stock fund (S) 16% 40% Bond fund (B) 10% 31% The correlation between the fund returns is 0.11. Required: What is the Sharpe ratio of the best feasible CAL?arrow_forward
- [The following information applies to the questions displayed below.] A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a sure rate of 5.5%. The probability distributions of the risky funds are: Expected Return Standard Deviation Stock fund (S) 16% 32% Bond fund (B) 10% 23% The correlation between the fund returns is 0.20 Required: What is the Sharpe ratio of the best feasible CAL? (Do not round intermediate calculations. Round your answer to 4 darrow_forwarda. A mutual fund is a professionally managed type of collective investment scheme that pools money from many investors and invests in stocks, bonds, short-term money market instruments and other securities. The performance of these mutual funds and the portfolio they build needs to be evaluated as frequently as possible. Evaluating the performance of these mutual funds is important for both existing and potential investors. The Table below provides the average return, standard deviation and betas of selected equity mutual funds over a period of three years. The average risk free rate for the period is estimated at 15%. Portfolio Average return Standard Deviation Beta Portfolio A 27.62 16 1.2 Portfolio B 20.12 15 0.9 Portfolio C 26.25 12 1.05 GSE return(benchmark) 16.18 10 1.0 Required:Estimate and compare the performance of the funds with the market using:i. Treynor’s measureii. Sharpe’s measureiii. Jensen’s Measure b. The issuing of security goes through a number of…arrow_forwardWhich of the following best describes an index mutual fund? Mutual fund manager based on preset ratio of stocks and bonds. Mutual fund manage based on a person's anticipated year of retirement. Passively managed fund design to mimic a specific market. Mutual fund that attempts to earn rates of return that exceed the return of the market.arrow_forward
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