The Bruin Stock Fund sells ClassA shares that have a front-endload of 5.65 percent, a 12b-1 feeof 0.25 percent, and other feesof 0.79 percent. There are alsoClass B shares with a 5 percentCDSC that declines 1 percent peryear, a 12b-1 fee of 1.1 percent,and other fees of 0.79 percent.Assume the portfolio return is 12percent per year.What is thevalue of $1 invested in eachshare class if your investmenthorizon is 3 years?

Class A Suppose $1 to invest. The initial investment in Class A shares is $.9435 net of the…

Answered: The Bruin Stock Fund sells Class A…

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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If an investor buys shares in a no-load mutual fund for $40 and after eight years the shares appreciate to $57, what is (1) the percentage return and (2) the annual compound rate of return using time value of money? Round your answers to two decimal places. Percentage return: % The annual compound rate of return: %
A hedge fund with a 1 and 15 fee structure has a hard hurdle rate of 7.45%. If the incentive fee and management fee are calculated independently and the management fee is based on beginning-of-period asset values, an investor’s net return over a period during which the grows value of the fund has increase 19.45% is closest to A. 10.85%. B. 12.65%. C. 16.65%. D. 21.74%.
Your portfolio allocates equal funds to the DW Co. and Woodpecker, Inc. DW Co. stock has an annual return mean and standard deviation of 15 percent and 44 percent, respectively. Woodpecker, Inc., stock has an annual return mean and standard deviation of 11.4 percent and 58 percent, respectively. The return correlation between DW Co. and Woodpecker, Inc., is zero. What is the smallest expected loss for your portfolio in the coming month with a probability of 16 percent? (Negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.) Smallest expected loss %
The Closed Fund is a closed-end investment company with a portfolio currently worth $170 million. It has liabilities of $6 million and 9 million shares outstanding. Required: a. What is the NAV of the fund? b. If the fund sells for $20 per share, what is its premium or discount as a percent of net asset value?
A mutual fund manager expects her portfolio to earn a rate of return of 11% this year. The beta of her portfolio is 0.9. The rate of return available on risk-free assets is 4% and you expect the rate of return on the market portfolio to be 14%. a. What expected rate of return would you demand before you would be willing to invest in this mutual fund? Note: Do not round intermediate calculations. Enter your answer as a whole percent. b. Is this fund attractive to you? a. "Expected rate of return b. Is this fund attractive to you? %
You plan to invest in the Kish Hedge Fund, which has total capital of $500 million invested in five stocks: Stock's Beta Coefficient 0.3 1.4 2.3 1.0 E 1.3 Kish's beta coefficient can be found as a weighted average of its stocks' betas. The risk-free rate is 3%, and you believe the following probability distribution for future market returns is realistic: Stock A B III. 4.1% + (11,6%) b TV. 4.1% + (11.5%) b V. n-3.0 % + (11.6%) b) C Investment $160 million 120 million D 80 million 80 million 60 million Market Return -25% 0 13 0.2 32 0.1 55 a. What is the equation for the Security Market Line (SML)? (Hint: First determine the expected market return.) 1.5.2% + (10.5%) b II. n-3.0%+ (11.5%) b Probability 0.1 0.2 0.4 -Select B b. Calculate Kish's required rate of return. Do not round intermediate calculations. Round your answer to two decimal places. % c. Suppose Rick Kish, the president, receives a proposal from a company seeking new capital. The amount needed to take a position in the…
An open-end fund has a net asset value of $13.40 per share. It is sold with a front-end load of 6%. What is the offering price?
Suppose at the start of the year, a no-load mutual fund has a net value of RM27.15 per share. During the year, it pays its shareholders a capital gain and dividend distribution of RM1.12 per share and finishes the year with NAV of RM30.34. Required: a. b. If at the end of the year, the fund is selling is selling at 5% discount, what is the rate of return? C. What is the return to an investor who holds 2000 shares of this fund in his retirement account? d. Differentiate between open end and closed end funds. Assume at the end of year, the company change its policy and charge. 12b-1 fees of 2%, What is the rate of return?
The Bruin Stock Fund sells Class A shares that have a front-end load of 5.25 percent, a 12b-1 fee of .33 percent, and other fees of 1.03 percent. There are also Class B shares with a 5 percent CDSC that declines 1 percent per year, a 12b-1 fee of 1.5 percent, and other fees of 1.03 percent. Assume the portfolio return is 8 percent per year. a. What is the value of $1 invested in each share class if your investment horizon is 3 years? (Do not round intermediate calculations. Round your answers to 2 decimal places.) b. What if your investment horizon is 20 years? (Do not round intermediate calculations. Round your answers to 2 decimal places.)
Suppose that a mutual fund manager has a $20 million portfolio with a beta of 1.7. Also suppose that the risk free rate is 4.5% and the market risk premium is 5%. The manager expects to receive an additional $5 million, which is to be invested in a number of new stocks to add to the portfolio. After these stocks are added, the manager would like the fund's required rate of return to be 12%. For notation, let represent the required return, let RF represent the risk free rate, let b represent the beta of a group of stocks, and m represent the market return. According to the video, which equation most closely describes the security market line (SML)? OT=TRE+bx (M + TRF) O TRE-6x (rM - TRF) Or=TRF + TM-TRF ORF + bx (rM - TRF) Hint: Recall that the manager wants the new required rate of return for the portfolio to remain at 12%. Using the equation you just identified, and plugging in the relevant information, yields a beta of the portfolio, after the new stocks have been added, of…
Your portfolio allocates equal funds to DW Co. and Woodpecker, Inc. DW Co. stock has an annual return mean and standard deviation of 15 percent and 38 percent, respectively. Woodpecker, Inc., stock has an annual return mean and standard deviation of 10.2 percent and 52 percent, respectively. The return correlation between DW Co. and Woodpecker, Inc., is zero. What is the smallest expected loss for your portfolio in the coming month with a probability of 16 percent? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Round the z-score value to 3 decimal places when calculating your answer. Enter your answer as a percent rounded to 2 decimal places.) Answer is complete but not entirely correct. Smallest expected loss 8.19 %
The risk-free rate of return (r) is 2% and the expected market rate of return (rm) is 10%. The shares A, B and C all pay a dividend (D) of $6 a year. The betas for the shares are: A = 0.2; f = 1.0; and ?c = 1.8. The shares are all trading at the same price (P) of $60.Requirements. Answer the following questions:Q1. What are the expected returns on A, B and C?Q2. What are the expected prices of A, B and C?Q3. What action would you recommend for A?Q4. What action would you recommend for B?Q5. What action would you recommend for C?

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