In addition to risk-free securities, you are currently invested in the Tanglewood Fund, a broadbased fund of stocks and other securities with an expected return of 12% and a volatility of 25%. Currently, the risk-free rate of interest is 3%. Your broker suggests that you add a venture capital fund to your current portfolio. The venture capital fund has an expected return of 20%, a volatility of 19%, and a correlation of 0.6 with the Tanglewood Fund. Calculate the required return that make venture capital fund an attractive addition a. 20.37% O b. 10.11% c. C. 7.10% O d. 13.03%
In addition to risk-free securities, you are currently invested in the Tanglewood Fund, a broadbased fund of stocks and other securities with an expected return of 12% and a volatility of 25%. Currently, the risk-free rate of interest is 3%. Your broker suggests that you add a venture capital fund to your current portfolio. The venture capital fund has an expected return of 20%, a volatility of 19%, and a correlation of 0.6 with the Tanglewood Fund. Calculate the required return that make venture capital fund an attractive addition a. 20.37% O b. 10.11% c. C. 7.10% O d. 13.03%
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 5P
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![In addition to risk-free securities, you are currently invested in the Tanglewood Fund, a broadbased
fund of stocks and other securities with an expected return of 12% and a volatility of 25%. Currently,
the risk-free rate of interest is 3%. Your broker suggests that you add a venture capital fund to your
current portfolio. The venture capital fund has an expected return of 20%, a volatility of 19%, and a
correlation of 0.6 with the Tanglewood Fund. Calculate the required return that make venture capital
fund an attractive addition
O a. 20.37%
O b. 10.11%
c. 7.10%
O d. 13.03%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fe795797d-e6dc-47b4-b18d-16e99e979c80%2F062ca7c2-0446-4127-9873-2f7e3d3c5520%2Fcyf8ho7_processed.jpeg&w=3840&q=75)
Transcribed Image Text:In addition to risk-free securities, you are currently invested in the Tanglewood Fund, a broadbased
fund of stocks and other securities with an expected return of 12% and a volatility of 25%. Currently,
the risk-free rate of interest is 3%. Your broker suggests that you add a venture capital fund to your
current portfolio. The venture capital fund has an expected return of 20%, a volatility of 19%, and a
correlation of 0.6 with the Tanglewood Fund. Calculate the required return that make venture capital
fund an attractive addition
O a. 20.37%
O b. 10.11%
c. 7.10%
O d. 13.03%
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