1 Which one of the following statements is correct (true)?Multiple ChoiceO Deferring payment of taxes in retirement plans is generally undesirable due to the effects of the time value of money.If an individual delays taking Social Security benefits (checks) past the time they are initially eligible for benefits (eg. they start taking acheck at age 66 instead of 62) the amount of the monthly benefit will be larger.In most 401) type of retirement plans when distributions are taken during retirement only gains & income are taxed whereas returns ofcapital (e. the contributions made from the employee's paycheck) are not taxed.Contributions to a Roth IRA are generally tax-deductible (e come from pre-tax dollars). A style box, such as the one given in the Personal Investing handout, is used to help people more easily understand the make-up of the companies heldby a mutual fund, and therefore the risk and return associated with that mutual fund. Over time (Le. on average) an investor would expect to earn thegreatest rate of return on a mutual fund which would be included in which one of the following cells?Multiple ChoiceLarge velueMedium valueSmall growthLarge growth

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Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter15: Financial Statement Analysis

Section: Chapter Questions

Problem 12DQ

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Suppose you manage an equity fund with the following securities. Use the following data to help build an active portfolio. Input Data Vogt Industries Isher Corporation Hedrock, Incorporated Alpha 0.012 0.006 0.016 Beta 0.277 1.015 1.630 Standard Deviation 0.156 0.168 0.181 Residual Standard Deviation 0.117 0.048 0.113 Information Ratio 0.1026 0.1250 0.1416 Alpha/Residual Variance 0.877 2.604 1.253 Market Data S&P 500 Treasury Bills Expected Raturn 12.00% 2.50% Standard Deviation 20.00% 0.00% Required: Using the information in the table above, please first calculate the initial weight of each stock in an active portfolio, using the Treynor Black approach. Then adjust each weight for beta. (Use cells A5 to D14 from the given information to complete this question.) Treynor-Black Model Vogt Industries Isher Corporation Hedrock, Incorporated…
1. Suppose there is a mutual fund and each consumer buys | a share in it for her endowment at t = 0. The mutual fund maximises the wealth of its shareholders when choosing IF, the investment in the long term technology. At t =1, the mutual fund pays dividend d to each of its shareholders. At t = 1, the shares can be traded at price p*. a. Set up the mutual fund's optimisation problem and derive and interpret the first order condition. What happens when R increases and why? b. What is the optimal consumption profile cf , c and the optimal investment IF? | c. Calculate (i.e. derive an expression for) d and p. 2. Now suppose there is no financial intermediary to handle liquidity shocks. However, at t = 1 a market for bonds opens up and agents can trade their wealth at t = 1 for | wealth at t 2. Each bond pays 1 at t = 2 and its price is pM. Calculate the consumer's optimal investment decision IM at t = 0 , the price of the bond pM, and the optimal consumption in the two states cM, cM. 3.…
If you desire to forecast performance of a mutual fund for next year, the best forecast will be given by the a. geometric average return b. neither geometric average return nor arithmetic average return c. arithmetic average return d. both geometric average return and arithmetic average return You buy and hold a S&P 500 index fund. You always reinvest your dividends earned on the fund. Which method provides the best measure of the actual average historical performance of the investments you have chosen? a. both geometric average return and arithmetic average return b. neither geometric average return nor arithmetic average return c. arithmetic average return d. geometric average return
You Answered Correct Answer Jensen (1968) E proposed a very influential idea: when assessing mutual fund performance, we should compare funds only after accounting for the risks they take (rather than simply comparing returns). To see his argument, draw a SML, and put one dot above the SML (call it A) and one dot below it (call it B) while A and B have the same beta. (a) Describe the investment opportunities here. Buy B and sell A in a way that the portfolio has zero market beta Buy A and sell B in a way that the portfolio has zero market beta Just buy A to reach the highest possible return
As an equity analyst, you have developed the following return forecasts and risk estimates for two different stock mutual funds (Fund T and Fund U): Forecasted Return CAPM Beta Fund T 9.00% 1.20 Fund U 10.00% 0.80 3.b. Decide which fund is overvalued, undervalued or properly valued and explain why?
As a fund manager in Bull & Bear Securities, you are given the following information regarding your portfolio. Rate of Return if State Occurs {:[" State of "],[" Economy "]:} {:[" Probability of "],[" State of Economy "]:} Stock A Stock B Stock C Boom .72 .06 .11 .17 Bust .28 .19 -.04 .23 Based on the above information, compute the following: i) The expected return in boom economy for all the three stocks. ii) The expected return in bust economy for all the three stocks. iii) The expected return for the portfolio that invest 30 percent each in A and B and 40 percent in C. iv) The standard
a. A mutual fund is a professionally managed type of collective investment scheme that pools money from many investors and invests in stocks, bonds, short-tem money market instruments and other securities. The perfomance 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 retum, 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 retum (benchmark) Required: Estimate and compare the performance of the funds with the market using: 16.18 10 1.0 i. Treynor's measure ii. Sharpe's measure Jensen's Measure iii.
You have been given the following return information for a mutual fund, the market index, and the risk-free rate. You also know that the return correlation between the fund and the market is 0.97. Fund Market Risk-Free Year 2011 -21.84 -41.58 38 2012 2013 2014 25.1 21.2 4 14.1 14.5 2 6.4 8.8 -5.2 4 2015 -2.22 3 What are the Sharpe and Treynor ratios for the fund? (Do not round intermediate calculations. Round your answers to 4 decimal places.) Sharpe ratio Treynor ratio
a. A mutual fund is a professionally managed type of collective investment scheme that pools money from many investors and invests in stocks, bonds, short-tem money market instruments and other securities. The perfomance 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 retum, 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%. Standard Deviation Portfolio Portfolio A Portfolio B Portfolio C Average return Beta 27.62 16 1.2 20.12 15 0.9 26.25 12 1.05 GSE retum (benchmark) Required: Estimate and compare the performance of the funds with the market using: 16.18 10 1.0 i. Treynor's measure ii. Sharpe's measure iii. Jensen's Measure b. The issuing of security goes through a number of processes. Once…
Please explain in half a page a hedge fund or private equity fund strategy.
You have been given the following return information for a mutual fund, the market index, and the risk-free rate. You also know that the return correlation between the fund and the market is .98. Year 2015 2016 Fund -23.60% Market -44.50% Risk-Free 1% 25.10 21.50 3 2017 14.40 15.40 2 2018 2019 7.00 -2.40 9.20 -6.20 6 2 Calculate Jensen's alpha for the fund, as well as its information ratio. (Do not round intermediate calculations. Enter the alpha as a percent rounded to 2 decimal places. Round the ratio to 4 decimal places.) Jensen's alpha Information ratio %
You have been given the following return information for a mutual fund, the market index, and the risk-free rate. You also know that the return correlation between the fund and the market is 0.97. 1TTT Fund Risk-Free Market Year 2011 -20.6% -39.5% 2012 25.1 21.0 3 2013 13.9 13.9 2 2014 7.6 8.8 2015 -2.1 -5.2 2 What are the Sharpe and Treynor ratios for the fund? (Do not round intermediate calculations. Round your answers to 4 decimal places.) Sharpe ratio Treynor ratio

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