EBK INVESTMENTS
11th Edition
ISBN: 9781259357480
Author: Bodie
Publisher: MCGRAW HILL BOOK COMPANY
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Chapter 6, Problem 28PS
a
Summary Introduction
Adequate information:
Expected rate of return of risky portfolio =13%
Standard deviation of risky portfolio =25%
Expected return of active portfolio=18%
Standard deviation of active portfolio=28%
Risk-free rate=8%
To compute: The value when client switches 70% investment to passive portfolio and explain the disadvantages of the switch of investment.
Introduction:
Passive
b
Summary Introduction
Adequate information:
Expected rate of return of risky portfolio =13%
Standard deviation of risky portfolio =25%
Expected return of active portfolio=18%
Standard deviation of active portfolio=28%
Risk-free rate=8%
To compute: The slope of CAL with maximum chargeable fee .
Introduction:
Passive portfolio:
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You manage a risky portfolio with an expected rate of return of 19% and a standard deviation of 34%. The T-bill rate is 8%.
Suppose that your client prefers to invest in your fund a proportion y that maximizes the expected return on the complete portfolio
subject to the constraint that the complete portfolio's standard deviation will not exceed 19%.
a. What is the investment proportion, y? (Round your answer to 2 decimal places.)
Investment proportion y
b. What is the expected rate of return on the complete portfolio? (Do not round intermediate calculations. Round your answer to 2
decimal places.)
Rate of 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
If the risk-free rate (RFR) is 3.9% and the expected market risk premium (ie.,
E(Ra) – RFR) is 6.1%, calculate the expected return for each mutual fund according to the
3.а.
САРМ.
3.b.
Decide which fund is overvalued, undervalued or properly valued and explain
why?
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
f the risk-free rate (RFR) is 3.9% and the expected market risk premium (i.e.,
E(Ra) – RFR) is 6.1%, calculate the expected return for each mutual fund according to the
3.а.
САРМ.
Chapter 6 Solutions
EBK INVESTMENTS
Ch. 6.A - Prob. 1PCh. 6.A - Prob. 2PCh. 6 - Prob. 1PSCh. 6 - Prob. 2PSCh. 6 - Prob. 3PSCh. 6 - Prob. 4PSCh. 6 - Prob. 5PSCh. 6 - Prob. 6PSCh. 6 - Prob. 7PSCh. 6 - Prob. 8PS
Ch. 6 - Prob. 9PSCh. 6 - Prob. 10PSCh. 6 - Prob. 11PSCh. 6 - Prob. 12PSCh. 6 - Prob. 13PSCh. 6 - Prob. 14PSCh. 6 - Prob. 15PSCh. 6 - Prob. 16PSCh. 6 - Prob. 17PSCh. 6 - Prob. 18PSCh. 6 - Prob. 19PSCh. 6 - Prob. 20PSCh. 6 - Prob. 21PSCh. 6 - Prob. 22PSCh. 6 - Prob. 23PSCh. 6 - Prob. 24PSCh. 6 - Prob. 25PSCh. 6 - Prob. 26PSCh. 6 - Prob. 27PSCh. 6 - Prob. 28PSCh. 6 - Prob. 29PSCh. 6 - Prob. 1CPCh. 6 - Prob. 2CPCh. 6 - Prob. 3CPCh. 6 - Prob. 4CPCh. 6 - Prob. 5CPCh. 6 - Prob. 6CPCh. 6 - Prob. 7CPCh. 6 - Prob. 8CPCh. 6 - Prob. 9CP
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