Consider an MNC that is exposed to the Turkish Lira (L) and the Brazilian Real (R). Assume 40% of the MNC's funds are in Liras and 60% are in Reals. The standard deviation of exchange movements is 10% for L and 15% for R. The correlation coefficient between the Lira and the Real is 0.45. Based on this information, compute the standard deviation of this portfolio of funds. O 12.94% O 11.38% O 10.35% O 7.26% O 8.04%

Consider an MNC that is exposed to the Turkish Lira (L) and the Brazilian Real (R). Assume 40% of the MNC's funds are in Liras and 60% are in Reals. The standard deviation of exchange movements is 10% for L and 15% for R. The correlation coefficient between the Lira and the Real is 0.45. Based on this information, compute the standard deviation of this portfolio of funds. O 12.94% O 11.38% O 10.35% O 7.26% O 8.04%

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Suppose that we make contributions to a fund of $125 today and $750 in twoyears for a return of $1000 in one year. First write the Net Present Value as a function of the discount factor ν. Secondly, use the NPV to calculate the yield rate of this investment (select the larger value for i. Finally, explain whether or not this is a good investment for us. Please show all work
2. Consider two assets, S and B. The expected return on S is 12.2% while the expected return on B is 5.8 % . The standard deviation of Asset S returns is 20 %, while the standard deviation of Asset B returns is 10%. The correlation between Asset S and Asset B returns is 0.05. (a) What is the expected return on a portfolio with 20% of invested funds in S and 80% of invested funds in B? (b) What is the standard deviation of returns for a portfolio with 20% of invested funds in S and 80% of invested funds in B? (c) Compare your answers obtained in part (b) to the expected return and standard deviation of a portfolio will all funds invested in B, and summarize the principle demonstrated by the comparison. (d) Assume that the correlation of 0.05 was based on
An investment will provide the following future cash flows. Year 1 = 5,919 Year 2 = 8,327 Year 3 and 4 = 4,718 Year 5 = 3,048 Using a 9.01% discount rate, what is the present value of this investment?
Vega fund had return of 12%, a beta of 1.2, in a standard deviation of 25% last year t bills generated 2%. At the same time, the market portfolio generated return of 11% and the standard deviation of 20%. What is the information ratio of Vega fund ?
Assume a fund has $100 million and a target gross exposure of 180% and a target net exposure of 50%. What is the funds target long market value, short market value and net exposure in dollars?
Fund Beta Deviation (%) Return (%) Rf (%) XXX 1.07 5.13 19 6 YYY 1.02 4.28 17 6 ZZZ 0.86 3.52 12 6 Market 1 3.8 13 6 Compute the Sharpe Measure for the XXX fund. Compute the Treynor Ratio for the ZZZ fund. Compute the Jensen Measure for the YYY fund.
The Treasury bill rate is 4%, and the expected return on the market portfolio is 14%. According to the capital asset pricing model: a. What is the risk premium on the market? b. What is the required return on an investment with a beta of 1.4? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.) c. If an investment with a beta of 0.7 offers an expected return of 9.0%, does it have a positive or negative NPV? d. If the market expects a return of 12.0% from stock X, what is its beta? (Do not round intermediate calculations. Round your answer to 2 decimal places.) a. Market risk premium b. Return on investment % C. NPV d. Beta
B. J. Gautney Enterprises is evaluating a security. One - year Treasury bills are currently paying 3.0 percent. Calculate the investment's expected return and itsstandard deviation. Should Gautney invest in this security?Probability,ReturnProbability,Return0.20,-6%0.40, 1%0.20, 7%0.20, 8%
The average return, standard deviation, and beta for Fund A is given below along with data for the S&P 500 Index. Fund Average Return Standard Deviation Beta A 14.5% 24.6% 1.4 S&P 500 14.5% 21.3% 1 Risk-free 1% Calculate the Sharpe measure of performance for the S&P 500.
A market-neutral fund ($154,000,000) strives for very low market risk (β = 0.12). It believes it can generate α = 0.03 per quarter. The β of the underlying portfolio is 1.32. The risk-free rate is 0.5% per quarter and the S&P 500 is currently priced at 4,000 (E-mini S&P 500 multiplier = $50). Required: If the S&P 500 is 3,800 at the end of quarter, what is the expected return on the portfolio? Note: Do not round intermediate calculations. Round your answer to 2 decimal places.
The value in pounds of a fund at time t = 0 is V0 = 50, 000. After one year (at t = 1) it has increased to V1 = 51, 500 and at that time £1, 500 is withdrawn. After two years (at t = 2) the fund is worth V2 = 50, 800. (a) Compute the time-weighted rate of return. (b) If the fund is liquidated after two years what is the yield that has been achieved?
Qw.115.

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