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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MLC Fund Management is considering the following three (3) options for their new investment portfolio: Option 1 - A non-callable corporate bond that pays a coupon rate of 8% annually. The bond will mature in 30 years. The yield-to-maturity (YTM) of the bond is 7.5% and the face value of the bond is $1 000. Option 2 - An ordinary share which just paid a dividend of $6.00 with a constant dividend growth rate of 5% each year. The current market price of this share is $85. Option 3 - A $100 par value preference-share which pays a fixed dividend of 6%. The required rate of return for the preference shares with the same risk is 8%. Required: a) How much should MLC pay for the corporate bond that pays the coupon annually? If the coupon is paid quarterly, what is the new bond value? b) Calculate the market required rate of return for the ordinary share. c) Compute the value of the preference share. d) Explain why a preference share is considered a hybrid between an equity and a debt…
Top hedge fund manager Sally Buffit believes that a stock with the same market risk as the S&P 500 will sell at year-end at a price of $50. The stock will pay a dividend at year-end of $2. Assume that risk-free Treasury securities currently offer an interest rate of 2%. Average rates of return on Treasury bills, government bonds, and common stocks, 1900-2017 (figures in percent per year) are as follows. Average Premium (Extra return versus Treasury bills) ($) Average Annual Rate of Return ipped Portfolio ($) 3.8 Treasury bills Treasury bonds 5.3 1.5 Common stocks 11.5 7.7 Book Ask a. What is the discount rate on the stock? (Enter your answer as a percent rounded to 2 decimal places.) Print eferences Discount rate 9.70 % b. What price should she be willing to pay for the stock today? (Do not round intermediate calculations. Round your answer decimal places.) Stock price
Orange Corporation has a standard deviation of 25% and an expected return of 10 percent. Violet Corporation has a standard deviation of 20% and an expected return of 15 percent. The correlation coefficient between the two stocks is 0.5. If you invest 65 percent of your funds in Violet Corporation and 35 percent in Orange Corporation, what is the standard deviation of the portfolio? O 18% O 19% O 20% O 21%
Bulldogs Inc. has an investment fund amounting to P4,500,000. The portfolio consists of three stocks within the retail industry. P1,350,000 is invested in HLCM, 45% in MWIDE and the remaining in PHN. HLCM and PHN has a beta of 1.50 and 2, respectively. The average return on the market is 9.50% and it is 5% greater than the risk-free rate. The portfolio beta of investment held by Bulldogs Inc. is 2.What is the portfolio’s required rate of return? (In percentage, type the percentage sign on your answer)
The average return on the Market is 12% while the market risk premium is 7%. What is the require rate of return of the portfolio? (In percentage) Blue Co. has a collection of shares that is publicly trade. The value of each security and its stock beta are as follows: stock Investment Beta CEB 3,000,000 2 SMC 3,000,000 1.2 SCC 800,000 .5 MTB 1,200,000 1
"The following table gives the rate of return for a certain mutual fund from 2010 to 2014: Year Rate of Return 2010 -5.9% 2011 11.4% 2012 1.4% 2013 12.7% 2014 6.5% Compute the overall rate of return during this period. Round your answer to the nearest tenth of a percent."
Top hedge fund manager Sally Buffit believes that a stock with the same market risk as the S&P 500 will sell at year-end at a price of $49. The stock will pay a dividend at year-end of $3.00. Assume that risk-free Treasury securities currently offer an interest rate of 2.1%. Average rates of return on Treasury bills, government bonds, and common stocks, 1900–2020 (figures in percent per year) are as follows. Portfolio Average Annual Rate of Return (%) Average Premium (Extra return versus Treasury bills) (%) Treasury bills 3.7 Treasury bonds 5.4 1.7 Common stocks 11.5 7.7 What is the discount rate on the stock? Note: Enter your answer as a percent rounded to 2 decimal places. What price should she be willing to pay for the stock today? Note: Do not round intermediate calculations. Round your answer to 2 decimal places.
sofie Inc. has an investment fund amounting to P4,500,000. The portfolio consists of three stocks within the retail industry. P1,350,000 is invested in HLCM, 45% in MWIDE and the remaining in PHN. HLCM and PHN has a beta of 1.50 and 2, respectively. The average return on the market is 9.50% and it is 5% greater than the risk-free rate. The portfolio beta of investment held by Bulldogs Inc. is 2.What is the portfolio’s required rate of return?
You own a portfolio that has 1,000 shares of stock A, which is priced at $13.43 per share and has an expected return of 16.85 %, and 3,000 shares of stock B, which is priced at $9.10 per share and has an expected return of 7.61%. The risk-free return is 4.72% and inflation is expected to be 2.75%. What is the risk premium for your portfolio? 7.91% (plus or minus 4 bps) 7.51% (plus or minus 4 bps) 5.94% (plus or minus 4 bps) 10.66% (plus or minus 4 bps) None of the above is within 4 bps of the correct answer
Portfolio managers are frequently paid a proportion of the funds under management. Suppose you manage a $113 million equity portfolio offering a dividend yield (DIM) of 6.3%. Dividends and portfolio value are expected to grow at a constant rate. Your annual fee for managing this portfolio is 0.63% of portfolio value and is calculated at the end of each year. a. Assuming that you will continue to manage the portfolio from now to eternity, what is the present value of the management contract? Note: Do not round intermediate calculations. Enter your answer in millions rounded to 1 decimal places. b. What would the contract value be if you invested in stocks with a 5.3% yield? Note: Enter your answer in millions rounded to 2 decimal places. a. Present value $ 11.3 million b. Contract value $ 19.68 milllion
Shares in SergeantPepper will earn a return of 5.80% during a bull market, and 2.40% during a bear market. Shares in AbbeyRoad will earn a return of 8.00% during a bull market, and 1.90% during a bear market. Over the next year, there is a 74% chance of a bull market, otherwise it will be a bear market. What is the covariance of the two security returns? 0.003552 0.000786 0.000399 0.000175
Your portfolio allocates equal funds to DW Company and Woodpecker, Incorporated. DW Company stock has an annual return mean and standard deviation of 15.5 percent and 44 percent, respectively. Woodpecker stock has an annual return mean and standard deviation of 12.6 percent and 44 percent, respectively. The return correlation between DW and Woodpecker is zero. What is the smallest expected loss for your portfolio in the coming month with a probability of 16 percent? Note: 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. X Answer is complete but not entirely correct. Smallest expected loss -20.43 × %

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