2. Mitch has invested money in a hedge fund whose return has been 12.40 percent in the recent year. Shewants to check where does her hedge fund rank among the hedge funds. She would like to change thehedge fund if the fund return fail to lie in the top quartile. The return of hedge funds are given below(percentage).-34.5011.6024.6012.40-12.928.509.18-14.4838.417.456.243.06-1.4012.204.86If you were Mitch, would you change your hedge fund? Why?

In order to calculate the Top Quartile, we first need to arrange the data in the ascending order:…

Answered: Mitch has invested money in a hedge…

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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Kelli Blakely is a portfolio manager for the Miranda Fund, a core large-cap equity fund. The benchmark for performance measurement purposes is the S&P 500. Although the Miranda portfolio generally mirrors the asset class and sector weightings of the S&P, Blakely is allowed a significant amount of leeway in managing the fund. Blakely was able to produce exceptional returns last year (as outlined in the table below) through her market timing and security selection skills. At the outset of the year, she became extremely concerned that the combination of a weak economy and geopolitical uncertainties would negatively impact the market. Taking a bold step, she changed her market allocation. For the entire year her asset class exposures averaged 50% in stocks and 50% in cash. The S&P's allocation between stocks and cash during the period was a constant 97% and 3%, respectively. The risk-free rate of return was 2%. One-Year Trailing Returns Miranda Fund 10.2% 37% Return Standard deviation Beta…
You are an analyst for a large public pension fund and you have been assigned the task of evaluating two different external portfolio managers (Yellen and Zagami) who (actively) manage two funds which are considering. Your associates have assembled the following historical average return, standard deviation, and CAPM beta estimates for these two fund managers over the past five years. In addition, you have estimated that the risk premium for the market portfolio is 5.12% and the risk-free rate is currently 4.14%. What is Ms. Yellen's average "alpha" for the period. Report your answer in percentage format rounded to three decimal places. (For example.1234 should be entered as "12.3"). Fund Manager Actual Avg. Return Standard Deviation Ms. Yellen 11% Mr. Zagami 8.24% Answer: 11.07 8.75% Beta 1.18 0.9
Interest rate. Two mutual fund managers, Martha and David, have been discussing whose fund is the top performer. Martha states that investors bought shares in her mutual fund 11 years ago for $23.00, and those shares are now worth $53.00. David states that investors bought shares in his mutual fund 7 years ago for only $3.60, and they are now worth $8.20. Which mutual fund manager had the higher growth rate for the management period? Should this comparison be made over different management periods? Why or why not? Which mutual fund manager has had the highest growth rate for the management period? (Select the best response.) A. David has had the highest growth rate of 12.48% for the management period. B. David has had the highest growth rate of 7.88% for the management period. C. Martha has had the highest growth rate of 7.88% for the management period. D. Martha has had the highest growth rate of 12.48% for the management period.…
Hedge Funds have become an increasingly popular investment options over the past 15 years, with managers making bold statements about the benefits of investingwith hedge funds. List the three main benefits that are claimed to arise when investing in a hedge fund. Do you believe that these benefits exist?
Greta, an elderly investor, has a degree of risk aversion of A = 3 when applied to return on wealth over a one-year horizon. She is pondering two portfolios, the S&P 500 and a hedge fund, as well as a number of one-year strategies. (All rates are annual and continuously compounded.) The S&P 500 risk premium is estimated at 5% per year, with a SD of 20%. The hedge fund risk premium is estimated at 10% with a SD of 35%. The returns on both of these portfolios in any particular year are uncorrelated with its own returns in other years. They are also uncorrelated with the returns of the other portfolio in other years. The hedge fund claims the correlation coefficient between the annual return on the S&P 500 and the hedge fund return in the same year is zero, but Greta is not fully convinced by this claim.What should be Greta’s capital allocation?
You are considering investing in a mutual fund. The fund is expected to earn a return of 13 percent in the next year. If its annual return is normally distributed with a standard deviation of 17 percent, what return can you expect the fund to beat 95 percent of the time? (Note: Write your answer as decimals with three decimal places. For example, if you answer is -8.7%, you should write -0.087 in the answer box. DO NOT write -8.7 in the box as you will be marked wrong).

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