Should the fund manager receive performance bonus

Assignment Help Financial Management

Reference no: EM132049408

Recall the Alpha fund from the previous problem which had a beta of 1.5 and earned a return of 25% over a period in which the market portfolio earned 15% and the risk-free rate was 5%.

a) Suppose that, due to a lack of diversification, the Alpha fund has the same total risk as a perfectly diversified portfolio with a beta of 2.0 (its adjusted beta is 2). Decompose the portfolio's return due to selectivity into its return due to net selectivity and its return due to lack of diversification (graphs are not necessary here).

b) Suppose that portfolio A has a target beta of 2.0. Decompose the portfolio's return due to risk into its return due to target risk and its return due to the manager's choice of risk (graphs are not necessary here).

c) Should the fund manager receive a performance bonus? Explain.

Reference no: EM132049408

Questions Cloud

Why do you think union membership has been declining : Why do you think union membership has been declining? Do you think the downward trend will continue?

Address the qualifications and job requirements : You will find a job announcement of interest to you and write a letter of application to the job. Be sure to address the qualifications and job requirements.

Provide the reason for full credit : If Company X wants to place an order of 8,000 units, which supplier offers a lower total cost. Provide the reason for full credit.

Discuss the vision into performance model : Discuss the Vision into Performance Model and how it relates to the employee selection process?

Should the fund manager receive performance bonus : Should the fund manager receive a performance bonus? Explain.

What is the probability that a service call takes : What is the probability that a service call takes more than 30 minutes? (Be sure to indicate the relevant Z-score for the problem).

On what kind of website does the information appear : On what kind of website does the information appear? Is the author listed? If not, can you determine who might have written it?

Implement a small routed network : ICTNWK404 - Install, operate and troubleshoot a small enterprise branch network - Certificate IV in Information Technology

How do you define environmental scanning : How do you define environmental scanning? What is the main purpose of conducting an environmental scanning? Why is it important?

User Account

All Pages