You have identified an actively managed mutual fund with the following characteristics: alpha of 0.50%, beta of
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Question:
You have identified an actively managed mutual fund with the following characteristics: alpha of 0.50%, beta of 1.3, and standard deviation of 16%. The expected excess return on the S&P500 is 7% and its variance is 0.013. Use the Index Model. How much of your optimal risky portfolio should you actively manage?
Expert Answer:
To solve this problem we need to use the Index Model to determine the optimal allocation to the acti... View the full answer
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