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Which of the following describes a well-diversified investment portfolio? O One invested entirely in US Treasury bonds. O One invested entirely in the stocks and bonds of the 10 largest companies in the world. O One with half of the money invested in a few selected stocks and the other half in US Treasury bonds. O One invested entirely in a stock fund that invests in 100 different biotech companies. O One invested entirely in a stock index fund that invests in the stock of the 1000 largest companies in the United State
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- Ed Lawrence has OMR100,000 invested. Of that, OMR30,000 is invested in IBM stock, OMR25,000 is invested in T-bills, and the remainder is invested in corporate bonds. Which of the following is true regarding his portfolio?(Using the CAPM to find expected returns) Sante Capital operates two mutual funds headquartered in Houston, Texas. The firm is evaluating the stock of four different firms for possible inclusion in its fund holdings. As part of their analysis, Sante's managers have asked their junior analyst to estimate the investor-required rate of return on each firm's shares using the CAPM and the following estimates: The rate of interest on short-term U.S. Treasury securities is currently 2.5 percent, and the expected return for the market portfolio is 10 percent. What should be the expected rates of return for each investment? Security A B Beta 1.72 0.77 a. The expected rate of return for security A, which has a beta of 1.72, is %. (Round to two decimal places.)Carol Harrod is the investment officer for a $100 million U.S. pension fund. The fixed-income portion of the portfolio is actively managed, and a substantial portion of the fund’s large capitalization U.S. equity portfolio is indexed and managed by Webb Street Advisors.Harrod has been impressed with the investment results of Webb Street’s equity index strategy and is considering asking Webb Street to index a portion of the actively managed fixed-income portfolio.a. Describe the advantages and disadvantages of bond indexing relative to active bond management.b. Webb Street manages indexed bond portfolios. Discuss how an indexed bond portfolio is constructed under stratified sampling (cellular) methods.c. Describe the main source of tracking error for the cellular method.
- (Using the CAPM to find expected returns) Sante Capital operates two mutual funds headquartered in Houston, Texas. The firm is evaluating the stock of four different firms for possible inclusion in its fund holdings. As part of their analysis, Sante's managers have asked their junior analyst to estimate the investor-required rate of return on each firm's shares using the CAPM and the following estimates: The rate of interest on short-term U.S. Treasury securities is currently 4 percent, and the expected return for the market portfolio is 10 percent. What should be the expected rates of return for each investment? Security Beta A 1.67 B 0.58 C 1.14 D 0.78 (Click on the icon in order to copy its contents into a spreadsheet.) Question content area bottom Part 1 a. The expected rate of return for security A, which has a beta of 1.67, is enter your response here%. (Round to two decimal places.) Part 2 b. The expected…Use the information for the question(s) below. An exchange-traded fund (ETF) is a security that represents a portfolio of individual stocks. Consider an ETF for which each share represents a portfolio of three shares of International Business Machines (IBM), five shares of Apple (AAPL), and eight shares of Tesla (TSLA). Suppose the current market price of each individual stock is shown below: Stock Current Price IBM $145.60 Apple $180.00 Tesla $267.50 What is the price per share of the ETF in a normal market? Assume that the ETF is trading for $3,700.00. What (if any) arbitrage opportunity exists? What (if any) trades would you make?You plan to invest $1000 in a corporate bond fund or in a common stock fun. The information to the right about the annual return (per $1000) of each of these investments under different economic conditions is available, along with the probability that each of these economic conditions will occur. Complete parts (a) through (c) a. Compute the expected return for the corporate bond fund and for the common stock fund b. Compute the standard deviation for the corporate bond fund and for the common stock fund c. Would you invest in the corporate bond fund or the common stock fund? Explain.
- Consider a mutual fund that manages a portfolio of securities worth $120 million.Suppose the fund owes $4 million to its investment advisers and owes another $1million for rent, wages due, and miscellaneous expenses.The fund has 5 million shareholders.What is the Net Asset Value?Topic: ISLAMIC INVESTMENT Answer all the following question?. Assume that you are the President of ABC Investments, a firm that invests in stock exchange markets worldwide. As president, you appointed investment Managers, Alam and Anas, to select shares that you would invest RM215,000 in each in January next year. Then, managers will manage shares and advise when to sell them, bearing in mind the objective to maximize return. Table 1 shows the data collected in the subsequent year. Investment manager Alam Anas Initial investment RM215,000 RM215,000 Sale value RM229,000 RM235,000 Holding period 4 months 7 months Dividends collected RM6,000 RM9500 Calculate the HPR for the stock of both Investment managers. What is the annualize HPR for Alam and Anas? Note: that the consumer price index (CPI) is a measure taken from examining the average of prices from a hypothetical basket of goods and services purchased by…You are the financial manager of a competitive investment company in South Africa. You have been presented with two possible investments: Pink Limited and Purple Limited as shown below. You have been supplied with the following information regarding the two companies. Pink Limited Purple Limited Earnings before interest and tax R3 000 000 R4 000 000 Long term interest bearing debt R500 000 R800 000 Earnings attributable to shareholders R2 124 000 R2 822 400 Tax rate 28% 28% Share Capital R2 000 000 R5 000 000 Number of ordinary shares issued 200 000 400 000 Number of ordinary shares authorised 1 000 000 500 000 Current market price of the share R30 R20.00 Dividend per share R5 R3 As a financial manager you are very concerned about the dividend yield and dividend payout ratio as these…
- 9. You have just purchased shares in the Hi-Tech Long-Term Bond Fund, a mutual fund that invests inlong-term corporate bonds. Your purchase constitutesa.A direct transfer of funds.b.An indirect transfer through an investment banker.c.An indirect transfer through a financial intermediary.d.A money market transaction.e.All of the above. 10. Which of the following statements is correct?a.The SEC must approve the price at which a stock is to be offered to the public when a company"goes public."b.If a company's stock is listed, then it trades in the over-the-counter (OTC) market.c.If the "preemptive right" exists in a company's charter, then the holders of its Class A shareshave the right to receive a specified amount of dividends before dividends can be paid on ClassB shares.d.A "prospectus" is a document which describes a company and the securities it plans to offer, andthe prospectus generally must be approved by the SEC before a public offering of new securitiescan be made.e.The…You are the financial manager of a competitive investment company in South Africa. You have been presented with two possible investments: Pink Limited and Purple Limited as shown below. You have been supplied with the following information regarding the two companies. Pink Limited Purple Limited Earnings before interest and tax R3 000 000 R4 000 000 Long term interest bearing debt R500 000 R800 000 Earnings attributable to shareholders R2 124 000 R2 822 400 Tax rate 28% 28% Share Capital R2 00 000 R5 000 000 Number of ordinary shares issued 200 000 400 000 Number of ordinary shares authorised 1 000 000 500 000 Current market price of the share R30 R20.00 Dividend per share R5 R3 As a financial manager you are very concerned about the dividend yield and dividend payout ratio as these…You are the financial manager of a competitive investment company in South Africa. You have been presented with two possible investments: Pink Limited and Purple Limited as shown below. You have been supplied with the following information regarding the two companies. Pink Limited Purple Limited Earnings before interest and tax R3 000 000 R4 000 000 Long term interest bearing debt R500 000 R800 000 Earnings attributable to shareholders R2 124 000 R2 822 400 Tax rate 28% 28% Share Capital R2 000 000 R5 000 000 Number of ordinary shares issued 200 000 400 000 Number of ordinary shares authorised 1 000 000 500 000 Current market price of the share R30 R20.00 Dividend per share R5 R3 As a financial manager you are very concerned about the dividend yield and dividend payout ratio as these…
