INVESTMENTS (LOOSELEAF) W/CONNECT
11th Edition
ISBN: 9781260465945
Author: Bodie
Publisher: MCG
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Chapter 4, Problem 23PS
Summary Introduction
Adequate information:
The bid ask spread pertaining to the value of trade accounts for 0.4%. the turnover rate of the portfolio accounts for 50%.
To calculate:
The Portfolio's total return decreased by the cost of trading
Introduction:
The turnover ratio of the fund refers to the measurement that reflects the percentage associated with the holding of specific fund, which have been turned over or replaced during the past year.
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Suppose that every time a fund manager trades stock, transaction costs such as commissions and bid–ask spreads amount to .4% of the value of the trade. If the portfolio turnover rate is 50%, by how much is the total return of the portfolio reduced by trading costs?
Suppose that every time a fund manager trades stock, transaction costs such as commissions and bid–ask spreads amount to 2.8% of the value of the trade. If the portfolio turnover rate is 50%, by how much is the total return of the portfolio reduced by trading costs? (Round your answer to 1 decimal place.)
Reconsider the Fingroup Fund in the previous problem. If during the year the portfolio manager sells all of the holdings of stock D and replaces it with 200,000 shares of stock E at Php50 per share and 200,000 shares of stock F at Php25 per share, what is the portfolio turnover rate?
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INVESTMENTS (LOOSELEAF) W/CONNECT
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