EBK ESSENTIALS OF INVESTMENTS
10th Edition
ISBN: 8220102800267
Author: Bodie
Publisher: YUZU
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Chapter 4, Problem 28PS
You expect a tax-free municipal bond portfolio to provide a
a. What fraction of portfolio income is given up to fees?
b. If the management fees for an equity fund also are 0.6%, but, you expect a portfolio return of 12%, what fraction of portfolio income is given up to fees?
c. Why might management fees be a bigger factor in your investment decision for bond fluids than for stock funds? Can your conclusion help explain why unmanaged unit investment trusts lend to focus on the fixed-income market?
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You expect a tax-free municipal bond portfolio to provide a rate of return of 4%. Management fees of the fund are .6%. What fraction of portfolio income is given up to fees? If the management fees for an equity fund also are .6%, but you expect a portfolio return of 12%, what fraction of portfolio income is given up to fees? Why might management fees be a bigger factor in your investment decision for bond funds than for stock funds? Can your conclusion help explain why unmanaged unit investment trusts tend to focus on the fixed-income market?
3) Suppose the value function v(.) of an investment fund manager is defined by:
v(x) = x for gains and v(x) = -2|x| for losses.
Yesterday, the fund manager had a good day: their investments earned $15m.
Today, the fund manager had a bad day: their investments lost $10m.
a) What is the fund manager's value if they integrate the investment returns for the two days?
b) What is the fund manager's value if they evaluate the investment returns for the two days
separately?
c) Discuss how an investor's information evaluation horizon (i.e., frequent vs infrequent) might
affect their investment strategy.
Solve the problems listed below. Show your solution and box the final answer. (bond or yellow paper)
1. A fund is set up to charge a load. Its net asset value is P16.50 and its offer price is P17.30.
A. How much is the commission of the load?
B. What percentage of the offer price does the commission represent?
C. What percentage of the net asset value does the commission represent?
D. Assume the fund increased in value by .30 the first month after you purchased 100 shares. What is the total gain or loss? Compare the total current value with the total purchase amount.
E. By what percentage would the net asset value of the shares have to increase for you to break even?
2. Under peso-cost averaging, an investor will purchase P6,000 worth of stock each year for three years. The stock price is P40 in year 1, P30 in year 2 and P48 in year 3.
A. What is the share purchased in every year?
B. Compute the average price per share.
C. Compute the average cost per share.
3. Under peso-cost…
Chapter 4 Solutions
EBK ESSENTIALS OF INVESTMENTS
Ch. 4 - Prob. 1PSCh. 4 - Prob. 2PSCh. 4 - Prob. 3PSCh. 4 - Prob. 4PSCh. 4 - Prob. 5PSCh. 4 - Prob. 6PSCh. 4 - Prob. 7PSCh. 4 - Prob. 8PSCh. 4 - Prob. 9PSCh. 4 - Prob. 10PS
Ch. 4 - An open-end fund has a net asset value of $10.70...Ch. 4 - Prob. 12PSCh. 4 - The composition of the Fingroup Fund portfolio is...Ch. 4 - Reconsider the Fingroup Fund in the previous...Ch. 4 - Prob. 15PSCh. 4 - Prob. 16PSCh. 4 - Prob. 17PSCh. 4 - Loaded-Up Fund charges a 12b-1 fee of 1% and...Ch. 4 - City Street Fund has a portfolio of $450 million...Ch. 4 - Prob. 20PSCh. 4 - Prob. 21PSCh. 4 - Prob. 22PSCh. 4 - Prob. 23PSCh. 4 - Prob. 24PSCh. 4 - Prob. 25PSCh. 4 - Prob. 26PSCh. 4 - Prob. 27PSCh. 4 - You expect a tax-free municipal bond portfolio to...Ch. 4 - Prob. 29PSCh. 4 - Prob. 30CCh. 4 - Prob. 1WMCh. 4 - Prob. 2WMCh. 4 - Prob. 3WM
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