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1) You are presently invested in Farrallon Fund, a broad based fund of stocks and other securities with the expected return of 12% and volatility of 25%. Presently, risk free rate of interest is 4%.Your broker recommends that you add the venture capital fund to your present portfolio. Venture capital fund has the expected return of 20%, a volatility of 80%, and correlation of 0.2 with the Farralon Fund. Compute the needed return and use it to decide whether you must add venture capital fund to your portfolio.

2) Which of the given is true about impact on market price of the security when the company makes the declaration and market has discounted the news?

i) The price will modify a great deal; although the impact is mainly in future, future value is discounted to present.

ii) The price will modify little, if at all, as the impact is mainly in future.

iii) The price will modify little, if at all, as the market considers this information insignificant.

iv) The price will modify little, if at all, as the market considers this information false.

v) The price will modify little, if at all, as the market has already included this information in the security's price.

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M914451

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