A company has to meet obligations of $8 million in 1 year and $6 million in...
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A company has to meet obligations of $8 million in 1 year and $6 million in four years from now and would like to invest in bonds today to allow it to cover the payments. The yield curve is flat at 8 per cent. The management of the company is concerned about the reinvestment risk as interest rates can change. a) You have decided to undertake an evaluation of the performance of the BRAC Equity Fund (BEF). You have collected the following data: Return = 20%, risk-free rate = 6%, portfolio beta = 1.1 and the return on the relevant equity Index = 16%. Evaluate the fund's performance relative to its systematic risk. < A company has to meet obligations of $8 million in 1 year and $6 million in four years from now and would like to invest in bonds today to allow it to cover the payments. The yield curve is flat at 8 per cent. The management of the company is concerned about the reinvestment risk as interest rates can change. a) You have decided to undertake an evaluation of the performance of the BRAC Equity Fund (BEF). You have collected the following data: Return = 20%, risk-free rate = 6%, portfolio beta = 1.1 and the return on the relevant equity Index = 16%. Evaluate the fund's performance relative to its systematic risk. <
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