You are a portfolio manager of a global equity fund of funds UITF. You decided to hold a portfolio with 80 percent invested in the S&P 500 equity index fund and the remaining in the Blackrock Emerging Markets Index Fund. The expected return for the former is 9.93% and then 18.20% for the Blackrock Emerging Markets index. The risk (standard deviation) is 16.21 % for the S&P 500 and 33.11 % for the Blackrock Emerging Markets index. What will be the portfolio’s expected return?
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- You are a
portfolio manager of a global equity fund of funds UITF. You decided to hold a portfolio with 80 percent invested in the S&P 500 equity index fund and the remaining in the Blackrock Emerging Markets Index Fund. The expected return for the former is 9.93% and then 18.20% for the Blackrock Emerging Markets index. The risk (standard deviation) is 16.21 % for the S&P 500 and 33.11 % for the Blackrock Emerging Markets index. What will be the portfolio’s expected return?
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- 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 a. If the risk-free rate is 3.9 percent and the expected market risk premium (£(RM) -RFR} is 6.1 percent, calculate the expected return for each mutual fund according to the CAPM. b. Using the estimated expected returns from part (a) along with your own return forecasts, demonstrate whether Fund T and Fund U are currently priced to fall directly on the security market line (SML), above the SML, or below the SML. c. According to your analysis, are Funds T and U overvalued, undervalued, or properly valued?You are a portfolio manager of a global equity fund of funds UITF. You decided to hold a portfolio with 80 percent invested in the S&P 500 equity index fund and the remaining in the Blackrock Emerging Markets Index Fund. The expected return for the former is 9.93% and then 18.20% for the Blackrock Emerging Markets index. The risk (standard deviation) is 16.21 % for the S&P 500 and 33.11 % for the Blackrock Emerging Markets index. What is the portfolio’s expected risk in terms of standard deviation given that the covariance between the S&P 500 equity index fund and the Blackrock Emerging Markets index is 0.5 percent or 0.0050?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): Fund T Fund U Forecasted Return 9.0% 10.0 CAPM Beta 1.20 0.80 a) If the risk-free rate is 3.9 % and the expected market risk premium is 6.1%, calculate the expected return for each mutual fund according to the CAPM. b) Using the estimated expected returns from Part a along with your own return forecasts, explain whether Fund T and Fund U are currently priced to fall directly on the security market line (SML), above the SML, or below the SML. Are Funds T and U overvalued, undervalued, or properly valued?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.If you create a portfolio for your client with 73 percent invested in the S&P 500 U.S. stock index (which includes T) and the remaining 27 percent in the Vanguard Gold index. The expected return is 30 percent for the S&P 500 and 3 percent for the Vanguard Gold index. The risk is 7.5 percent for the S&P 500 and 5 percent for the Vanguard Gold index. Estimate the portfolio’s return and risk given that the correlation coefficient between the S&P 500 and the Vanguard Gold index is -0.3? (e) Evaluate the effect of a change in the correlation coefficient to 0.8 on the portfolio’s return and risk. (f) If you are interested in constructing a portfolio with 20% in the U.S energy sector and 80% in the U.S. consumer staples sector, which Exchange Traded Funds (ETF) could you use?
- You create a portfolio consisting of $23000 invested in a mutual fund with beta of 1.3, $25000 invested in Treasury Securities (assume risk-free), and $12000 invested in an index fund tracking the market. According to surveys, the expected market risk premium is 6.6%, Risk-free rate is 1.3%. What is the expected return of this portfolio according to CAPM?You create a portfolio consisting of $23000 invested in a mutual fund with beta of 1.3, $25000 invested in Treasury Securities (assume risk-free), and $12000 invested in an index fund tracking the market. According to surveys, the expected market risk premium is 6.6%, risk free rate is 1.3%. What is the expected return of this portfolio according to CAPM? Answer in percent, rounded to one decimal place.You are working on creating a portfolio that mimics a fully diversified market index. Assume that you have $1 million fund to invest. You plan to allocate $195,000 and $365,000 of your fund to invest in stock A and B, respectively. To achieve your goal, you need to add an additional risky stock C and a risk-free bond to your portfolio. Assume that betas for stock A, B, and C are 0.80, 1.09, and 1.23, respectively. How much would you invest in stock C and risk-free bond?
- Assume that you are the portfolio manager of the SF Fund, a $3 million hedge fund that contains the following stocks. The required rate of return on the market is 11.00% and the risk-free rate is 5.00%. What rate of return should investors expect (and require) on this fund? (Hint: first calculate the weights, then calculate the beta of the portfolio and then calculate the required return of the portfolio.) Show your work. Stock Amount Weights Beta A $1,075,000 ? 1.20 B 675,000 ? 0.50 C 750,000 ? 1.40 D 500,000 ? 0.75 $3,000,000Consider the following information and then calculate the required rate of return for the Global Equity Fund, which includes 4 stocks in the portfolio. The market's required rate of return is 17.75%, the risk-free rate is 5.65%, and the Fund's assets are as follows:Round your answer to two decimal places. For example, if your answer is $345.6671 round as 345.67 and if your answer is .05718 or 5.7182% round as 5.72. Stock Investment Beta A $225,000 1.35 B $335,000 0.75 C $575,000 –0.45 D $1,055,000 1.98 A.21.28% B.18.26% C.18.08% D.19.96% E.18.83%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?