You are considering investing in a mutual fund. The fund is expected to earn a return of 15 percent in the next year. If its annual return is normally distributed with a standard deviation of 22 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).

You are considering investing in a mutual fund. The fund is expected to earn a return of 15 percent in the next year. If its annual return is normally distributed with a standard deviation of 22 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).

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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Bhupatbhai
14. You are interested in an investment fund with an expected annual rate of return of 15% and a standard deviation of 12% a year. If you invest $2 million in this fund, what is 95% VaR? In other words, there is 95% confidence that you will not lose more than ( ) over one year. How much money should be in the parentheses? Assume that the returns on the fund follow a normal distribution.
Suppose you are the money manager of a $4.38 million investment fund. The fund consists of four stocks with the following investments and betas: Stock Investment Beta A $ 240,000 1.50 B 700,000 (0.50) C 1,140,000 1.25 D 2,300,000 0.75 If the market's required rate of return is 10% and the risk-free rate is 5%, what is the fund's required rate of return? Do not round intermediate calculations. Round your answer to two decimal places. ? %
You purchase a mutual fund for $17.23 The fund's NAV is $17.00 (the load fee was .23 cents). The NAV subsequently rises to $22.00, and you redeem the shares. What is the percentage return on your investment
Suppose you are the money manager of a $4.88 million investment fund. The fund consists of four stocks with the following investments and betas: Stock Investment A $ 260,000 B 640,000 с 1,180,000 D 2,800,000 0.75 If the market's required rate of return is 10% and the risk-free rate is 3%, what is the fund's required rate of return? Do not round intermediate calculations. Round your answer to two decimal places. % Beta 1.50 (0.50) 1.25
You manage a risky portfolio with expected rate of return of 16% and a standard deviation of 28%. The T-bill rate is 3%. Suppose that your client feels that the most she can invest in your portfolio is 60% of her portfolio and she will place the other 40% in a risk-free investment (T-bill. Given this choice, what would be the client's degree of risk aversion, A? 2.51 2.76 O 2.37 2.44
An investor has $80,000 to invest in Certificates of Deposit (CD) and a mutual fund. The CD yields 7% and the mutual fund yields 8%. The mutual fund requires a minimum investment of $8,000 and the investor requires at least twice as much should be invested in CDs as in the mutual fund. How much should be invested in each to maximize the return? What is the maximum return? Show your work and explanations setting this problem up. Variables should clearly be defined. Show all your work.
You are considering an investment in a mutual fund with a 5% load and an expense ratio of 0.75%. You can invest instead in a bank CD paying 3% interest. Required: a. If you plan to invest for 3 years, what annual rate of return must the fund portfolio earn for you to be better off in the fund than in the CD? Assume annual compounding of returns. b. What annual rate of return must the fund portfolio earn if you plan to invest for 6 years to be better off in the fund than in the CD? c. Now suppose that instead of a front-end load the fund assesses a 12b-1 fee of 0.50% per year. What annual rate of return must the fund portfolio earn for you to be better off in the fund than in the CD? Note: Do not round intermediate calculations. Round your answers to 2 decimal places.
Suppose you manage a $4 million fund that consists of four stocks with the following investments: Beta Stock A 1.50 B -0.50 1.25 C D 0.75 If the market's required rate of return is 14% and the risk-free rate is 7%, what is the fund's required rate of return? Do not round intermediate calculations. Round your answer to two decimal places. Investment $400,000 1,000,000 1,600,000 1,000,000 %
Suppose you are the money manager of a $4 million investment fund. The fund consists of four stocks with the following investments and betas: Stock Investment Beta A $300,000 1.25 B 700,000 (0.75) C 1,500,000 1.00 D 1,500,000 0.75 If the market's return in 12% and the risk-free rate is 5%, what is the fund's required rate of return (You must calculate the fund's beta, then its required rate of return).
Suppose you are the money manager of a $4.66 million investment fund. The fund consists of four stocks with the following investments and betas: Stock Investment Beta A $ 280,000 1.50 B 400,000 (0.50) C 1,280,000 1.25 D 2,700,000 0.75 If the market's required rate of return is 10% and the risk-free rate is 5%, what is the fund's required rate of return? Do not round intermediate calculations. Round your answer to two decimal places. %
Suppose you are the money manager of a $5.22 million investment fund. The fund consists of four stocks with the following investments and betas: Stock Investment Beta A $ 460,000 1.50 B 800,000 (0.50) C 1,260,000 1.25 D 2,700,000 0.75 If the market's required rate of return is 8% and the risk-free rate is 4%, what is the fund's required rate of return? Do not round intermediate calculations. Round your answer to two decimal places. %

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