Suppose the portfolio referenced in problem 8 actually yielded 10%. What would be the Alpha of...

Suppose the portfolio referenced in problem 8 actually yielded 10%. What would be the Alpha of the portfolio? For your convenience, problem 8 read as follows:

“Suppose the risk-free rate is 1% and the market’s risk premium is 7%. If a portfolio has a Beta of 1.2, what rate of return would you expect on this portfolio?”

Select one:

a. 1.3%

b. .6%

c. .4%

d. -1.3%

Solutions

Expert Solution

jeff jeffy answered 2 years ago

Next > < Previous

Related Solutions

Using the information from problem 8 on Alpha & Omega, what is the NPV (on a...

Using the information from problem 8 on Alpha & Omega, what is the NPV (on a 6-year extended basis) of System B? Enter your answer rounded to two decimal places. Do not enter $ or comma in the answer box. For example, if your answer is $12,300.456 then enter as 12300.46 in the answer box. Alpha & Omega wants to invest in a new computer system, and management has narrowed the choice to Systems A and B. System A requires...

Using the information from problem 8 on Alpha & Omega, what is the equivalent annual annuity...

Using the information from problem 8 on Alpha & Omega, what is the equivalent annual annuity (EAA) for System B? Enter your answer rounded to two decimal places. Do not enter $ or comma in the answer box. For example, if your answer is $12,300.456 then enter as 12300.46 in the answer box. Alpha & Omega wants to invest in a new computer system, and management has narrowed the choice to Systems A and B. System A requires an up-front...

15 What is Jensen's alpha of a portfolio comprised of 45 percent portfolio A and 55...

15 What is Jensen's alpha of a portfolio comprised of 45 percent portfolio A and 55 percent of portfolio B? Portfolio Average Return Standard Deviation Beta A 18.9 % 21.6 % 1.92 B 13.2 12.8 1.27 The risk-free rate is 3.1 percent and the market risk premium is 6.8 percent. 2.04 percent 0.47 percent 1.08 percent 1.46 percent −1.25 percent

Problem 8-7 Portfolio required return Suppose you are the money manager of a $4.09 million investment...

Problem 8-7 Portfolio required return Suppose you are the money manager of a $4.09 million investment fund. The fund consists of 4 stocks with the following investments and betas: Stock Investment Beta A $ 380,000 1.50 B 500,000 - 0.50 C 1,060,000 1.25 D 2,150,000 0.75 If the market's required rate of return is 10% and the risk-free rate is 7%, what is the fund's required rate of return? Round your answer to two decimal places.

Suppose you tell a financial advisory client that their portfolio experienced a positive Alpha of 2.4%....

Suppose you tell a financial advisory client that their portfolio experienced a positive Alpha of 2.4%. The market as a whole returned 12%. A rational response of your client would be: Select one: a. Well done. You beat the market on a risk adjusted basis for this period. b. I will not settle for a 2.4% return when the stock market is doing so well. c. I would need more information to decide if you did well or not. d....

suppose 4,900 units were actually sold. Would it be possible for this company to achieve its...

suppose 4,900 units were actually sold. Would it be possible for this company to achieve its Target Operating Profit of $108,000 (assuming fixed costs were $72,000). If so, why and what would have had to happen? i need this qnswerplease wiith in 1 hour

Problem 10-8 Calculate the NPV at 8% and the IRR for the following projects. Round the...

Problem 10-8 Calculate the NPV at 8% and the IRR for the following projects. Round the answers to two decimal places. Use a minus sign to indicate a negative NPV. An initial outlay of $69,724 and an inflow of $15,000 followed by four consecutive inflows of $17,000. Do not round intermediate calculations. Round PVF and PVFA values in intermediate calculations to four decimal places. NPV $ IRR % An initial outlay of $25,424 followed by two zero cash years and...

Suppose Stan holds a portfolio consisting of a $10,000 investment in each of 8 different common...

Suppose Stan holds a portfolio consisting of a $10,000 investment in each of 8 different common stocks. The portfolio's beta is 1.25. Now suppose Stan decided to sell one of his stocks that has a beta of 1.00 and to use the proceeds to buy a replacement stock with a beta of 0.76. What would the portfolio's new beta be? Select the correct answer. a. 1.06 b. 1.10 c. 1.22 d. 1.18 e. 1.14

Increasing the number of stocks in a portfolio from 10 to 25 would likely: A. increase...

Increasing the number of stocks in a portfolio from 10 to 25 would likely: A. increase the systematic risk of the portfolio B. increase the unsystematic risk of the portfolio C. decrease the variation in returns the investor faces in any one year D. increase the return of the portfolio D.

A portfolio gives at 10% return with a standard deviation of 18%. You would like the...

A portfolio gives at 10% return with a standard deviation of 18%. You would like the standard deviation to drop to 14%. What should you do? What should you do if you want the standard deviation to rise to 23%. OUR NOTES give the answers, however, I don't understand how they reached the numbers. The answer to the first part is to add more risk-free assets until they account for 4/18 of the portfolio The answer to the second part...

Subjects