Question a a mutual fund with beta of 8 has an expected, Ask an Expert

Finance

Question: a. A mutual fund with beta of .8 has an expected rate of return of 14%. If r_f =5%, and you expect the rate of return on the market portfolio to be 15%, should you invest in this fund? What is the fund's alpha?

b. What passive portfolio comprised of a market-index portfolio and a money market account would have the same beta as the fund? Show that the difference between the expected rate of return on this passive portfolio and that of the fund equals the alpha from part (a).

View complete question

Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M92845903

Have any Question?Write your Review or question?

Related Questions in Basic Finance

Express in other words explain the concept of cost of

Express in other words explain the concept of cost of capital? Do you believe that a firm should use the same cost of capital for all of its projects? Why or why not?

1 the additional interest rate premium required to

1. The additional interest rate premium required to compensate the lender for the probability that a borrower will not be able to repay interest and principal on a loan is known as? a. inflation premium b. default risk p ...

A firm has sales of 3540000 costs of 3260000 interest

A firm has sales of $3,540,000, costs of $3,260,000, interest expense of $70,000, and a tax rate of 28%. The firm paid $95,000 in cash dividends. What is the addition to retained earnings for the period?

Project q costs 240 it provides inflows of 120 per year for

Project Q costs 240. It provides inflows of 120 per year for three years. The cost of funds is 6%. Find the replacement chain value needed to compare it to a six year project.

A company is considering a new project that will require

A Company is considering a new project that will require $840,000 of new equipment at the start of the project. The equipment will have a depreciable life of 7 years and will be depreciated to a book value of $56,000 usi ...

1 you have been asked to develop a capitation rate for a

1. You have been asked to develop a capitation rate for a primary care group based on the following projections: Service Annual Frequency/1,000 Cost per Service Inpatient Visits 100 $7,000.00 Office Visits 3,000 $45.00 L ...

Ultra petroleum has earnings per share of 156 and a pe

Ultra Petroleum has earnings per share of $1.56 and a P/E ratio of $32.48. What is the stock price?

How does the review of cost records within a review of

How does the review of cost records within a review of project outcomes assist the organisation?

Q1 you invest 272 at the beginning of every year and your

Q1. You invest $272 at the beginning of every year and your friend invests $272 at the end of every year. If you both earn an annual rate of return of 14.00%. a) how much will you have in your account after 40 years? b) ...

A perpetual bond sells for 885 and pays a semiannual coupon

A perpetual bond sells for $885 and pays a semiannual coupon in the amount of $34. What is the annualized yield for the bond?

4,153,160 Questions Asked
13,132 Experts
2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Recent Questions

Ask Basic Finance Expert