What is the alpha for fad followers

Assignment Help Financial Management
Reference no: EM131575698

Assume that the economy has three types of people. 20% are fad followers, 75% are passive investors, and 5% are informed traders. The portfolio consisting of all informed traders has a beta of 1.4 and an alpha of 3.4%. The market has an expected return of 10% and the risk-free rate is 4 %.

What is the alpha for the fad followers? Enter your answer as a percentage to two decimal places (i.e. 0.12% rather than 0.0012; the percent sign is not necessary).

Reference no: EM131575698

Questions Cloud

Decides to lease an asset that conventional lease analysis : Decides to lease an asset that conventional lease analysis evaluation reveals have a negative Net Advantage to Leasing (NAL)
Determine key reasons why multinational corporation : "Multinational Financial Management" determine key reasons why a multinational corporation might decide to borrow in a country such as Brazil,
Is covered interest arbitrage worth while : You may borrow $25,000 worth of any currency that you are free to invest in any currency. Is covered interest arbitrage worth while?
What is a derivative : What "one thing" is having the most impact on US bond markets and interest rates? What is a derivative? Give three examples.
What is the alpha for fad followers : Assume that the economy has three types of people. 20% are fad followers, 75% are passive investors, What is the alpha for the fad followers?
Amount of fee income that galts fund will generate is : John Galt is a mutual fund manager at Atlas Asset Management. The amount of fee income that Galt's fund will generate is?
Dividends were paid to shareholders during the year : How much in dividends were paid to shareholders during the year?
What is arbitrage profit per dollar used : What is the cross-rate in terms of yen per pound? Suppose the cross-rate is ¥133 = £1. What is the arbitrage profit per dollar used?
Estimate is the difference between the annual inflation rate : What would you estimate is the difference between the annual inflation rates of the United States and Japan?

Reviews

Write a Review

Financial Management Questions & Answers

  Required return on stock-what is the current share price

A pocalyptica Corp. pays a constant $29 dividend on its stock. The company will maintain this dividend for the next 13 years and will then cease paying dividends forever. If the required return on this stock is 10 percent, what is the current share p..

  Calculate at what price the bonds are issued

Assuming the market rate of interest is 6%, calculate at what price the bonds are issued.

  Interest is compounded semi-annually

Angie invested $250,000 she received from her grandmother today in a fund that is expected to earn 10% per annum. To what amount should the investment grow in five years if interest is compounded semi-annually?

  Calculate all four capital budgeting techniques

ABC is evaluating a new project. You are the manager and need to make a decision: Calculate all four capital budgeting techniques A. Net present value, Which project(s) should be purchased it they are mutually exclusive?

  What is the present value of growth opportunities

A company plan to pay a dividend of $5 per share. The growth rate is 7 percent and the discount rate is 12 percent. What is the present value of growth opportunities?

  Find the sustainable and internal growth rates for firm

Find the sustainable and internal growth rates for a firm with the following ratios: asset turnover = 1.20;

  Production of goods and services has become globalized

Production of goods and services has become globalized to a large extent as a result of Skilled labor being highly mobile Natural resources being depleted in one country after another Multinational corporations' effort to source inputs and locate pro..

  Opportunity cost of foregoing the cash back option

L & M Auto is offering the option of either 0% financing for 5 years (monthly payments) or upfront cash back of $4,800 on the $41,000 purchase price of your new car. No upfront money is required for the purchase of the car. What is the annual percent..

  What does the mutual fund theory imply

What does the mutual fund theory imply?

  The yield on preferred stock normally is higher

The yield on preferred stock normally is higher when a. a stock is freely callable versus being noncallable. b. dividend rates are low. c. the quality is higher versus a lower quality preferred. d. market interest rates are lower versus when they are..

  Considering replacement of eight-year-old riveting machine

Mississippi River Shipyards is considering the replacement of an 8-year-old riveting machine with a new one that will increase earnings before depreciation from

  Leveraged and unleveraged capital structure

Kelso Electric is debating between a leveraged and an unleveraged capital structure. The all equity capital structure would consist of 40,000 shares of stock. The debt and equity option would consist of 25,000 shares of stock plus $280,000 of debt wi..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd