Question
In: Finance
Assume that you are the portfolio manager of the SF Fund, a $3 million hedge fund...
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%.
|
Stock |
Amount |
Beta |
|
A |
$1,075,000 |
1.20 |
|
B |
675,000 |
0.50 |
|
C |
750,000 |
1.40 |
|
D |
500,000 |
0.75 |
|
$3,000,000 |
Based on the CAPM wat rate of return should investors require on this fund?
Solutions
Expert Solution
| Ra = Rrf + ( B a X ( R m - Rrf) | ||||||||||
| Ra = Expected return on a security | ||||||||||
| Rrf = Risk-free rate | ||||||||||
| Ba = Beta of the security | ||||||||||
| Rm = Expected return on market | ||||||||||
| Note: Risk Premium = (Rm – Rrf) | ||||||||||
| Stock | Rrf % | "+" | "( | Beta | "X" | Rm | "-" | Rrf | )" | |
| A | 5% | "+" | "( | 1.20 | "X" | 11% | "-" | 5% | )" | |
| B | 5% | "+" | "( | 0.50 | "X" | 11% | "-" | 5% | )" | |
| C | 5% | "+" | "( | 1.40 | "X" | 11% | "-" | 5% | )" | |
| D | 5% | "+" | "( | 0.75 | "X" | 11% | "-" | 5% | )" | |
| Stock | Rrf % | "+" | "( | Beta | "X" | Rm - Rrf | )" | |||
| A | 5% | "+" | "( | 1.20 | "X" | 6% | )" | |||
| B | 5% | "+" | "( | 0.50 | "X" | 6% | )" | |||
| C | 5% | "+" | "( | 1.40 | "X" | 6% | )" | |||
| D | 5% | "+" | "( | 0.75 | "X" | 6% | )" | |||
| Stock | Rrf % | "+" | Beta X Rm - Rrf | |||||||
| A | 5% | "+" | 7.2% | |||||||
| B | 5% | "+" | 3.0% | |||||||
| C | 5% | "+" | 8.4% | |||||||
| D | 5% | "+" | 4.5% | |||||||
| Stock | Ra = | |||||||||
| A | 12.2% | |||||||||
| B | 8.0% | |||||||||
| C | 13.4% | |||||||||
| D | 9.5% | |||||||||
jeff jeffy answered 2 years agoRelated Solutions
1. Assume that you are the portfolio manager of the SF Fund, a $3 million hedge...
1. 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 12.00% and the risk-free
rate is 4.00%. What rate of return should investors expect (and
require) on this fund?
Stock Amount Beta
A $1,075,000 1.20
B 675,000 0.50
C 750,000 1.40
D 500,000 0.75
Total $3,000,000
A.10.56%
B.10.83%
C.11.11%
D.11.38%
E.12.14%
2. DVC stock has a required return of 25%. The expected market
return is 15% and the risk-free rate...
Kaiser is the portfolio manager of the SF Fund, a $3 million hedge fund that contains...
Kaiser is 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?
Stock
Amount
Beta
A
$1,075,000
1.20
B
675,000
0.50
C
750,000
1.40
D
500,000
0.75
$3,000,000
*Show your formulas and formula inputs.
Joel Foster is the portfolio manager of the SF Fund, a $3 million hedge fund that...
Joel Foster is 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?
*****Please show work on EXCEL spreadsheet, please show
EXCEL formulas****please do not answer unless you use
excel
STOCK
AMOUNT
BETA
A
$1,075,000
1.20
B
675,000
0.50
C
750,000
1.40
D
500,000
0.75...
Joel Foster is the portfolio manager of the Go Anywhere Fund, a $3 million hedge fund...
Joel Foster is the portfolio manager of the Go Anywhere Fund, a
$3 million hedge fund that contains the following stocks. The
required rate of return on the market is 8.75% and the risk-free
rate is 2.50%. What rate of return should investors expect (and
require) on this fund? Enter your answer rounded to two decimal
places. Do not enter % in the answer box. For example, if your
answer is 0.12345 or 12.345% then enter as 12.35 in the...
Joel Foster is the portfolio manager of the Go Anywhere Fund, a $3 million hedge fund...
Joel Foster is the portfolio manager of the Go Anywhere Fund, a
$3 million hedge fund that contains the following stocks. The
required rate of return on the market is 8.75% and the risk-free
rate is 2.50%. What rate of return should investors expect (and
require) on this fund?
Stock
Amount
Beta
A
$1,075,000
1.20
B
675,000
1.50
C
750,000
3.35
D
500,000
1.10
$3,000,000
A hedge fund manager has a portfolio worth $50 million with a beta of 1.25. The...
A hedge fund manager has a portfolio worth $50 million with a
beta of 1.25. The manager is concerned about the performance of the
market over the next two months He plans to uses three-month stock
market index futures to hedge his market exposure. The current
stock market index level is 2,500 and one contract is on 250 times
the futures price. The continuously compounded interest rate is 3%
and the dividend yield on the stock market index is 2%....
Suppose you’re a hedge fund manager responsible for a $3 billion equity portfolio. You’ve decided to...
Suppose you’re a hedge fund manager responsible for a $3 billion
equity portfolio. You’ve decided to use index futures to change the
beta of the portfolio from 1.2 to 0.8. Suppose the current value of
one index futures contract is $750,000 and the continuously
compounded risk-free interest rate is 7%. How many contracts should
you short?
Suppose you are the manager of a mutual fund and hold a RM10 million stock portfolio....
Suppose you are the manager of a mutual fund and hold a RM10
million stock portfolio. The
required market risk premium is 6.5% and the risk fee rate is 3%.
Stock A & B are 20% each
of its total portfolio, Stock C and D are 25% and 18% and the
remainder goes to Stock E.
Beta for Stock A, B, C, D and E are 0.75, 1.30, 1.6, 0.5 and 1.2.
The return for stock A and B
are...
A fund manager has a portfolio worth $10 million with a beta of 0.85. The manager...
A fund manager has a portfolio worth $10 million with a beta of
0.85. The manager is concerned about the performance of the market
over the next months and plans to use 3-month futures contracts on
the S&P 500 to hedge the risk. The current level of the index
is 2,800, one contract is 250 times the index, the risk-free rate
is 3% per annum, and the dividend yield on the index is 1% per
annum.
a) Calculate the theoretical...
A fund manager has a portfolio worth $100 million with a beta of 1.5. The manager...
A fund manager has a portfolio worth $100 million with a beta of
1.5. The manager is concerned about the performance of the market
over the next two months and plans to use three-month futures
contracts on the S&P 500 to hedge the risk. The current level
of the index is 2250, one contract is on 250 times the index, the
risk free rate is 2%, and the dividend yield on the index is 1.7%
per year. (Assume all the...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Explain the difference between a market penetration strategy and a market development strategy.
- QUESTION 4 Discuss the sanctity of life versus the quality of life debate as presented by...
- 0.560 g He, 20.482 g F2, and 13.960 g Ar are placed in a 18.4-L container...
- Let X ∼ Pois(4), Y ∼ Pois(12), U ∼ Pois(3) be independent random variables. a) What...
- which one is more nucleophilic: hydroxide ion (OH) , or ammonia (NH3)? Explain why
- A sample mixture of ethyl benzoate (bp 212 C) and dodecane (bp 216.2 C) is injected...
- Consider the markets for fossil fuels (oil, coal, natural gas) and alternative energy sources (solar, wind,...
ADVERTISEMENT