EBK INVESTMENTS
11th Edition
ISBN: 9781259357480
Author: Bodie
Publisher: MCGRAW HILL BOOK COMPANY
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Question
Chapter 26, Problem 7PS
Summary Introduction
To select:
The hedge fund which is earning a return almost same to risk-free return.
Introduction:
A hedge fund is a fund which is outside from governmental law and jurisdiction. It is mainly for a private limited
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Students have asked these similar questions
Which of the following hedge fund types is most likely to have a return that is closest to risk-free?a. A market-neutral hedge fund.b. An event-driven hedge fund.c. A long/short hedge fund.
How might the incentive fee of a hedge fund affect the manager’s proclivity to take on high-risk assets in the portfolio?
Which of the following would be the most appropriate benchmark to use for hedge fund evaluation?a. A multifactor model.b. The S&P 500.c. The risk-free rate.
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Similar questions
- Which of the following is TRUE? To construct a capital market line, we use expected return as y-axis and beta as x-axis On the capital market line debt securities are located to the right of the market portfolio To construct a security market line, we use expected return as y-axis and beta as x-axis Market portfolio lays at an intersection of the average indifference curve of a risk-averse investor and the efficient portfolioarrow_forwardWould a market-neutral hedge fund be a good candidate for an investor’s entire retirement portfolio? If not, would there be a role for the hedge fund in the overall portfolio of such an investor?arrow_forwardGive the difference between hedge funds and money market funds.arrow_forward
- When comparing the forward hedge to the money market hedge, the MNC can easily determine which hedge is more desirable, because the cost of each hedge can be determined with certainty. Group of answer choices True Falsearrow_forwardAn investor who uses only the Treynor ratio to evaluate the performance of a mutual fund is most likely to conclude: a. Total risk is more important than systematic risk b. The fund is not well-diversified. c. A measure of market portfolio performance is essential to evaluate the fund d. The beta of the fund captures the relevant risk of the fund.arrow_forwardWhich are the most efficient combination of securities that provides investors with maximum portfolio returns as portfolio risk increases?arrow_forward
- You develop the following covariance matrix of returns Hedge Fund Market Index Hedge Fund 64 42 Market Index 42 36 The correlation of returns between the hedge fund and the market index is closest toarrow_forwardWhich of the following is most accurate in describing the problems of survivorship bias and backfill bias in the performance evaluation of hedge funds?a. Survivorship bias and backfill bias both result in upwardly biased hedge fund index returns.b. Survivorship bias and backfill bias both result in downwardly biased hedge fund index returns.c. Survivorship bias results in upwardly biased hedge fund index returns, but backfill bias results in downwardly biased hedge fund index returns.arrow_forwardIt measures how much rate of return the fund manager/fund generates per unit of systematic risk (beta)? a.PSE b.Jensen Index c.Treynor Index d. Sharpe Indexarrow_forward
- If you knew that you can invest in a passive index fund, at a low cost, and capture all the returns of the market index, would that affect your opinion of the effectiveness of a strategy using technical analysis or fundamental analysis?arrow_forwardDescribe how a risk free hedge portfolio can be created using stock and options.arrow_forwardThe market risk premium is defined as __________. A. the difference between the return on an index fund and the return on Treasury bills B. the difference between the return on a small firm mutual fund and the return on the Standard and Poor's 500 index C. the difference between the return on the risky asset with the lowest returns and there turn on Treasury bills D. the difference between the return on the highest yielding asset and the lowest yielding assetarrow_forward
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