User Account

All Pages

What is the expected return on the mutual fund

Assignment Help Finance Basics
Reference no: EM132796885

A) Consider the following capital market: a risk-free asset yielding 2.25% per year and a mutual fund consisting of 70% stocks and 30% bonds. The expected return on stocks is 13.75% per year and the expected return on bonds is 3.75% per year. The standard deviation of stock returns is 40.00% and the standard deviation of bond returns 14.00%. The stock, bond and risk-free returns are all uncorrelated. What is the expected return on the mutual fund? Enter your answer rounded to two decimal places.

B) Using the data from problem A, what is the standard deviation of returns for the mutual fund? Enter your answer rounded to two decimal places.

C) Using the data from problem A, now, assume the correlation between stock and bond returns is 0.33 and the correlations between stock and risk-free returns and between the bond and risk-free returns are 0 (by construction, correlations with the risk-free asset are always zero). What is the standard deviation of returns for the mutual fund with this new higher correlation? Enter your answer rounded to two decimal places.

D) Using the data from problem C, what is the standard deviation of the minimum variance portfolio formed from this stock and bond portfolio? Enter your answer rounded to two decimal places.

Reference no: EM132796885

Questions Cloud

What is the arbitrage profit per share at the expiration : Assuming the analyst is correct, what is the arbitrage profit per share at the expiration date of the forward contract?
Determine the amount of cash paid for rent : Accounts payable went down by $4,000, salary payable went up by $3,000, and inventory went down by $2,000. Determine the amount of cash paid for rent.
Describe three recommendations for improvement : The child care facility environment will influence child-child, child-adult, and child-material interactions. Every aspect of the facility's design deserves.
Calculate Project X discounted payback period : Assume the discount rate is 10 percent. Calculate Project X's discounted payback period. Should the project be accepted
What is the expected return on the mutual fund : The stock, bond and risk-free returns are all uncorrelated. What is the expected return on the mutual fund? Enter your answer rounded to two decimal places.
What amount the loss on the disposal will be reported : Licorice division resulting in a loss of $60,000. Assuming a tax rate of 25%, the loss on this disposal will be reported on the income statement at what amount?
What is the implied repo rate : Morgan Stanley is quoting a forward price of $71.92 per share for a 4 month forward contract on Biogen stock. What is the implied repo rate?
How you can address the problem from a christian worldview : Share your thoughts on how you can address the problem from a Christian worldview. Topic: A Biblical Perspective for Addressing Organizational Problems.
What is the weighted average cost of capital for disneyland : The current market risk premium is 8.5 percent and the current risk-free rate is 3.6 percent. What is the weighted average cost of capital?

Reviews

Write a Review

Finance Basics Questions & Answers

  Financial reporting and analysis

Finance is about Gunns Ltd, a company in dealing with forestry products in Australia. The company has also been listed in Australian Stock Exchange. As many companies producing forestry products, even Gunns Ltd is facing various problems. Due to the ..

  A report on financial accounting

This report is specific for a core understanding for Financial Accounting and its relevant factors.

  Describe the types of financial ratios

Describe the types of financial ratios and other financial performance measures that are used during venture's successful life cycle.

  Differences between sole proprietorship and corporation

Briefly describe the major differences between a sole proprietorship and a corporation

  Prepare a cash budget statement

Calculate the expected value of the apartment in 20 years' time. What is the mortgage loan repayment at the beginning of each month

  What are the implied interest rates

What are the implied interest rates in Europe and the U.S.?

  State pricing theory and no-arbitrage pricing theory

State pricing theory and no-arbitrage pricing theory

  Small business administration

Identify the likely stage for each venture and describe the type of financing each venture is likely to be seeking and identify potential sources for that financing.

  Effect of financial leverage

The Effect of Financial Leverage and working capital management

  Evaluate the basis for the payment to the lender

Evaluate the basis for the payment to the lender and basis for the payment to the company-counterparty.

  Importance of opps, ipps, mpfs and dmepos

Research and discuss the differences and importance of : OPPS, IPPS, MPFS and DMEPOS.

  Time value of money

Time Value of Money project

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +91-977-207-8620

Phone: +91-977-207-8620

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

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