Larry is planning for retirement and wants to compare the past performance of a few mutual...

 

 

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Larry is planning for retirement and wants to compare the past performance of a few mutual funds he is considering for investment. He believes that a comparison over five-year period would be sufficient. He obtained the following information for ABC mutual fund. Year 12445 Asset Under Management (AUM) at the Beginning of the year $30M (USD) $36M (USD) $28.8M (USD) $34.56M (USD) $39.744M (USD) Net Return (%) 20% -20% 20% 15% 5% 1) Please computer the holding period return assuming no outflow or inflow of money. 2) Compute the Arithmetic Mean Annual Return. 3) Computer the Geometric Mean Annual Return. 4) Compute the Standard Deviation for this mutual fund Question 2 Comment on the S&P 500 historical returns. 1) Is it likely to be normally distributed and what could be the pieces of evidence to support your conclusion? 2) Contrast the differences between a normal distribution and another distribution with fat tails please describe the normal distribution's statistics properties (Less than 100 words). State of the Economy Recession Boom Normal Probability of each state O(A) o(B) 20% 20% 60% Weight A Weight B ABC Please calculate the Expected Return for ABC stock and its standard deviation. -20% 35% 10% A portfolio consisted of two risky assets A and B Correlation 0.45 A's Expected Return 7.00% B' Expected Return 9.00% 15.00% 20.00% 75.00% 25.00% 1) Please calculate the portfolios expected return and portfolio's standard deviation. 2) If we change the Correlation Coefficient from 0.45 to -1, please recalculate the portfolio's expected return and standard deviation. 3) Please comment on the portfolio's risk after we change the Correlation from 0.45 to -1. What is your observation (less than 50 words) If you were given a risky asset A and a risk free asset and the following information. A's Expected Return Risk free asset's return o(A) 10.00% 4.00% 15.00% 1) What do you expect the correlation between the risky asset and the risk free asset? 2) Please express the Capital Allocation line and calculate the risk premium of the risky asset. Larry is planning for retirement and wants to compare the past performance of a few mutual funds he is considering for investment. He believes that a comparison over five-year period would be sufficient. He obtained the following information for ABC mutual fund. Year 12445 Asset Under Management (AUM) at the Beginning of the year $30M (USD) $36M (USD) $28.8M (USD) $34.56M (USD) $39.744M (USD) Net Return (%) 20% -20% 20% 15% 5% 1) Please computer the holding period return assuming no outflow or inflow of money. 2) Compute the Arithmetic Mean Annual Return. 3) Computer the Geometric Mean Annual Return. 4) Compute the Standard Deviation for this mutual fund Question 2 Comment on the S&P 500 historical returns. 1) Is it likely to be normally distributed and what could be the pieces of evidence to support your conclusion? 2) Contrast the differences between a normal distribution and another distribution with fat tails please describe the normal distribution's statistics properties (Less than 100 words). State of the Economy Recession Boom Normal Probability of each state O(A) o(B) 20% 20% 60% Weight A Weight B ABC Please calculate the Expected Return for ABC stock and its standard deviation. -20% 35% 10% A portfolio consisted of two risky assets A and B Correlation 0.45 A's Expected Return 7.00% B' Expected Return 9.00% 15.00% 20.00% 75.00% 25.00% 1) Please calculate the portfolios expected return and portfolio's standard deviation. 2) If we change the Correlation Coefficient from 0.45 to -1, please recalculate the portfolio's expected return and standard deviation. 3) Please comment on the portfolio's risk after we change the Correlation from 0.45 to -1. What is your observation (less than 50 words) If you were given a risky asset A and a risk free asset and the following information. A's Expected Return Risk free asset's return o(A) 10.00% 4.00% 15.00% 1) What do you expect the correlation between the risky asset and the risk free asset? 2) Please express the Capital Allocation line and calculate the risk premium of the risky asset.

Answer rating: 100% (QA)

1 To calculate the holding period return we can use the formula Holding Period Return Ending Value Beginning Value Beginning Value For ABC mutual fund ... View the full answer