Question: Suppose that an actively managed equity funds average monthly return is 1.4% and its volatility is 6.8%. A regression of the funds returns on an

Suppose that an actively managed equity funds average monthly return is 1.4% and its volatility is 6.8%. A regression of the funds returns on an S&P 500 index fund (assumed to represent the market portfolio) yields a beta of 0.5. The riskless rate has been 0.3% and the average return on the S&P 500 fund has been 1% over the sample period of the analysis. The volatility of the market return is 3.9%.

What fraction of the funds return variance is systematic based on the market model?

	A.	91.78%
	B.	57.35%
	C.	8.22%
	D.	42.65%

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Suppose that an actively managed equity fund's average monthly return is 1.4% and its volatility is 6.8%. A regression of the fund's returns on an S&P 500 index fund (assumed to represent the market...

QUESTION 11 Suppose that an actively managed equity fund's average monthly return is 1.4% and its volatility is 6.8%. A regression of the fund's returns on an S&P 500 index fund (assumed to represent...

1. XYZ is an actively managed mutual fund that invests in US large capitalization stocks and seeks to outperform the S&P 500. The annual returns of XYZ Fund and an S&P 500 Index Fund from 1996...

You recently graduated from college, and your job search led you to S&S Air. Because you felt the companys business was headed skyward, you accepted the job offer. As you are finishing your...

Retirement Planning at J&J Bagel You recently graduated from Suffolk University, and your job search led you to J&J Bagel, Inc. As you are finishing your employment paperwork, Jerry Chen, one of the...

Rodrigo Norieg Retirement Planning at J&J Bagel You recently gradiuated from Suffolk University, and your job search led you to J&J Bagel, Inc. As you are finishing your employment paperwork, Jerry...

You have been at your job with East Coast Yachts for a week now and have decided you need to sign up for the companys 401(k) plan. Even after your discussion with Sarah Brown, the Bledsoe Financial...

Please help answer these questions please. I cannot get this segment that were learning at all. A Job at S&S Air You recently graduated from college, and your job search led you to S&S Air. Because...

Let A be an m x n matrix of rank n and let P = A(ATA)-1 AT. (a) Show that Pb - b for every b R(A). Explain this in terms of projections. (b) If b R(A), show that Pb = 0. (c) Give a geometric...

Use C++ language to develop an original implementation of a menu-driven program performing a number of tasks relating to students? details: displaying all students? details, adding new student to the...

Collin and Jennifer Baird purchased their dream home for $ 2 3 0 , 0 0 0 in 2 0 1 1 . They ve always wanted to have a home gym so did substantial renovations to their basement so that it was fully...

Add "Viggo Mortenslet cast = new Map ( ) ;en " to the cast as the key, with value "Aragorn".