Portfolio A has earned a historical return of 14% per year. The risk-free rate is 2%....
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Portfolio A has earned a historical return of 14% per year. The risk-free rate is 2%. Assuming that Fama-French 3 factor model is the correct model. You apply the multiple linear regression to decompose the performance of Portfolio A with the Fama-French 3 factor model. You find that Portfolio A has an alpha of -5% (negative alpha!) and you decide to construct a mimicking portfolio that has the same factor risks as portfolio A. What is the expected return of your mimicking portfolio? Multiple Choice 7% 9% 14% 17% Portfolio A has earned a historical return of 14% per year. The risk-free rate is 2%. Assuming that Fama-French 3 factor model is the correct model. You apply the multiple linear regression to decompose the performance of Portfolio A with the Fama-French 3 factor model. You find that Portfolio A has an alpha of -5% (negative alpha!) and you decide to construct a mimicking portfolio that has the same factor risks as portfolio A. What is the expected return of your mimicking portfolio? Multiple Choice 7% 9% 14% 17%
Expert Answer:
Answer rating: 100% (QA)
17 Stepbystep explanation Expected Return of Portfolio A Historical return of Portf... View the full answer
Posted Date:
Students also viewed these accounting questions
-
The risk free rate of interest on government securities in 2013 is 7.3% Required: Prepare a report for the directors of In Style Pty. Ltd assessing its: a) Profitability. b) Efficiency. |2013 |2012 y...
-
The risk free rate is 7%, the return in the market is 10%, and the beta is 1.30. What return must you receive to be satisfied that you are being fairly compensated for the risk of the firm?
-
Suppose the following conditions hold. The risk free rate is 4% and the market risk premium is 6%. We have a portfolio containing three stocks and a risk-free asset. We have $50 of the risk-free...
-
Explain fully the role played by unplanned investment in inventories in determining equilibrium in the Keynesian model. Use the examples of AD > GDP and AD < GDP to illustrate your answer.
-
Develop cause-and-effect diagrams for any one of the following problems: a. Poor exam grade b. No job offers c. Too many speeding tickets d. Late for work or school
-
As of June 30, 2012, the bank statement showed an ending balance of $13,879.85. The unadjusted Cash account balance was $13,483.75. The following information is available: 1. Deposit in transit,...
-
Casey Ltds accounting system uses special journals and subsidiary ledgers. The following transactions occurred during March 2025 (GST is ignored). All sales are n/30. Required (a) Ignoring GST, enter...
-
Security IDs Company purchased equipment on July 1, 2010, for $135,000. The equipment was expected to have a useful life of three years, or 12,000 operating hours, and a residual value of $6,000. The...
-
18 years ago, I purchased 185 shares of a stock worth $14.25 per share. There was a 2:1 split, a 4:1 split, and a 3:1 split during that time period. Today the stock is worth $1.53 per share. If the...
-
Frequently we read in the newspaper that one should lease an automobile rather than buying it. For a typical 24-month lease on a car costing $9400, the monthly lease charge is about $267. At the end...
-
A population has a distribution that is skewed to the left. Indicate in which of the following cases the central limit theorem apply to describe the sampling distribution of the sample mean n=400 b....
-
List five types of cancer in which ncRNAs can be involved.
-
What is the difference between an miRNA and an siRNA? How do these ncRNAs affect mRNAs?
-
Compare and contrast the roles of crRNA and tracrRNA in the defense against bacteriophages provided by the CRISPR-Cas system.
-
Explain how HOTAIR plays a role in the transcriptional regulation of particular genes.
-
Why is a host-cell tRNA needed for reverse transcription?
-
do disagreements and conflict make us uneasy? There are those that identify as battlers, those that avoid conflict at any cost, and those that are the collaborators or peacemakers. Which type are...
-
Below is a sample of the data in the file NFLAttendance which contains the 32 teams in the National Football League, their conference affiliation, their division, and their average home attendance....
-
The treatment of outflows on account of dividend and interest is highly debatable as to their activity classification. Give a serious thought to the issue and express your opinion about the best...
-
Consider the same setting as Problem 18, but suppose instead 80% of the shareholders redeem their shares, and no warrants are exercised. Data from problem 18 a. What is the amount of cash per share...
-
Form a small group. Concentrate on BSE Sensex companies and compile the voluntary disclosures made by each of them. Draft a crisp research paper highlighting your findings and use thereof to various...
Study smarter with the SolutionInn App