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Some information is provided below about five different investment funds, each investing in a different portfolio of assets. The funds are based in the United States (US) and some additional information about the market is also provided. For this question, assume that the normal CAPM holds: r = rf + Beta x MRP. Market Information: Market risk premium: 5% Riskfree rate: 1.50% Information on investment funds: Zeta Fund lota Fund Pi Fund 100% short Fund profile term US government bonds 100% diversified US shares 100% diversified US shares Mu Fund 80% diversified US Gamma Fund shares, 20% diversified US 100% US electricity and utility company shares real estate Market value of $310 million $1.3 billion $890 million $620 million $105 million portfolio Beta ? 1.20 1.35 ? 0.55 Expected annual return according to ? 7.50% 8.25% 6.00% 4.25% the CAPM Actual average annual return over 2.10% 7.80% 8.10% 9.80% 12.00% the last 5 years Required: Complete all questions below by filling in your answers or choosing the correct answer. (a) According to the CAPM, the expected return on the Zeta fund is %. Note: Please provide your answer with two decimal points in the format of xx.xx (for example, if the answer is 12.345%, type in 12.34). (b) The CAPM beta of the Mu fund is: Note: Please provide your answer with two decimal points in the format of xx.xx (for example, if the answer is 1.234, type in 1.23). (c) Which fund would you expect to have the largest percentage decrease in value as a result of an economic recession in the US? Some information is provided below about five different investment funds, each investing in a different portfolio of assets. The funds are based in the United States (US) and some additional information about the market is also provided. For this question, assume that the normal CAPM holds: r = rf + Beta x MRP. Market Information: Market risk premium: 5% Riskfree rate: 1.50% Information on investment funds: Zeta Fund lota Fund Pi Fund 100% short Fund profile term US government bonds 100% diversified US shares 100% diversified US shares Mu Fund 80% diversified US Gamma Fund shares, 20% diversified US 100% US electricity and utility company shares real estate Market value of $310 million $1.3 billion $890 million $620 million $105 million portfolio Beta ? 1.20 1.35 ? 0.55 Expected annual return according to ? 7.50% 8.25% 6.00% 4.25% the CAPM Actual average annual return over 2.10% 7.80% 8.10% 9.80% 12.00% the last 5 years Required: Complete all questions below by filling in your answers or choosing the correct answer. (a) According to the CAPM, the expected return on the Zeta fund is %. Note: Please provide your answer with two decimal points in the format of xx.xx (for example, if the answer is 12.345%, type in 12.34). (b) The CAPM beta of the Mu fund is: Note: Please provide your answer with two decimal points in the format of xx.xx (for example, if the answer is 1.234, type in 1.23). (c) Which fund would you expect to have the largest percentage decrease in value as a result of an economic recession in the US?
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Related Book For
International Marketing And Export Management
ISBN: 9781292016924
8th Edition
Authors: Gerald Albaum , Alexander Josiassen , Edwin Duerr
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