You manage a $100m portfolio long/short fund. You identify undervalued and overvalued stocks and construct the following portfolios: Portfolio Expected Return Standard Deviation Beta A 12% 20% 1.2 B 3% 15% 0.9 Use the following information Correlation between A and B Expected market return Risk-free rate Short rebate .8 9% 2% 1% Your fund buys $100m of portfolio A and short-sells $100m of portfolio B. i. What is the beta of the fund? ii. What are expected alpha and Sharpe ratio of fund?

Answer rating: 100% (QA)

To calculate the beta of the fund we need to consider the weighted average beta of the long and shor... View the full answer