1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
drek231 [11]
3 years ago
7

A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and co

rporate bond fund, and the third is a T-bill money market fund that yields a sure rate of 5.5%. The probability distributions of the risky funds are: Expected Return Standard Deviation Stock fund (S) 15 % 32 % Bond fund (B) 9 % 23 % The correlation between the fund returns is 0.15. What is the Sharpe ratio of the best feasible CAL?
Business
1 answer:
timofeeve [1]3 years ago
5 0

Answer:

0.296875

Explanation:

Given the following :

Probability distribution of risky funds :

- - - - - - - - - - - - - - stock fund(S) - - bond fund(B)

Expected return - - - 15% - - - - - - - - - - 9%

Std - - - - - - - - - - - - - 32% - - - - - - - - - - 23%

Correlation between funds return = 0.15

Sure rate = 5.5%

To calculate the Sharpe ratio we use the formula :

Sharpe Ratio = (Expected Return of Investment - Risk Free Rate) / Standard Deviation of excess return of investment

For the stock fund :

Expected return = 15%

Risk free rate = market sure rate = 5.5%

Standard deviation = 32%

Sharpe ratio of stock fund :

(15% - 5.5%) / 32%

= 9.5% / 32%

= 0.296875

For Bond fund :

Expected return = 9%

Risk free rate = market sure rate = 5.5%

Standard deviation = 23%

Sharpe ratio of bond fund :

(9% - 5.5%) / 23%

= 3.5% / 23%

= 0.1521739

Therefore the Sharpe ratio of the best feasible CAL is the higher of the two ratios which is 0.296875

You might be interested in
John's friend just gave him a pair of concert tickets to see his favorite rock group perform this weekend. Each ticket sells for
Len [333]

Answer:

$80 lost for not working

Explanation:

Opportunity cost refers to the sacrificed benefits as a result of preferring on a particular option over another. As people make choices, the forfeit one option in favor of another. Opportunity cost is the missed value of the next best alternative.

For John, he has a choice between working or going to the concert.  He has two tickets worth $50. Working would mean her twice her regular income, which is $20 per hour. If he works for four hours, his total earning will be $80. If John chooses to go to the concert, he will miss the opportunity to earn $80. The opportunity cost will be the missed $80 that he would have received from working.

6 0
3 years ago
Which of the following is most likely to be considered a profit center?
likoan [24]

Answer:

A. The grocery department of a Walmart Supercenter or Target Superstore

Explanation:

  • A profit center is a type of business where the business is expected to make into valuable contributions, a profit center can be treated as a separate business of the company.  
  • The profits and losses for that center are calculated separately. Examples of profit centers include the store, sales organization, or consulting organization.
3 0
3 years ago
Suppose the demand function​ (D) for golf clubs​ is: Qequals150minus1.00​P, where P is the price paid by consumers in dollars pe
nadya68 [22]

Answer:

P = $75 per club

n= 75,000 clubs

Explanation:

The demand and supply functions are:

(D): Q=150-1.00P\\(S): Q=1.00P\\

The equilibrium price is the price that yields a quantity demanded equal to the quantity supplied:

150-1.00P=1.00P\\P=\frac{150}{2}\\P=\$75

The number of units sold at that price is:

n=1,000*(1.00*75)\\n=75,000\ units

8 0
2 years ago
Ben and Chris combined their love of football with a business venture. They purchased a small portable cart and began selling fo
wolverine [178]

Answer: Option C

Explanation: Environmental circumstances refers to the threats and opportunities that arise from political and economical unstability. These are highly fluctuating factors and can affect the business highly.

In the given case, the business of Ben and Chris slowed down due to the economic breakdown in the country. These factors are inescapable and affect all the businesses in the economy.

Thus, from the above we can conclude that the correct option is C.

4 0
3 years ago
You are considering buying one of two types of health insurance, both with the same premium. You guess that in the next year the
dybincka [34]

Answer and Explanation:

The computation is shown below:

a. The expected value of payout arise from emergency is

= 0.01 × $67,500

= $675

b. The expected value of payout arise from capped coverage insuance is

= (0.9 × $500) + (0.09 × $2,500)

= $675

c. The risk averse shows the minimum exposure with respect to the swings of the income or there would be the loss in the income. Since the payout amount is same in both the cases so here we considered option B

8 0
2 years ago
Other questions:
  • On the first day of the fiscal year, Hawthorne Company obtained an $88,000, 7-year, 5% installment note from Sea Side Bank. The
    6·1 answer
  • A restaurant chain has used data mining to determine that its hot dogs are unpopular with diners. Therefore, it reduces its orde
    10·1 answer
  • The graph shows the price of a good compared to the quantity demanded and the quantity supplied. On this graph, what does the gr
    15·1 answer
  • As the president of a local trade company, Kristin is faced with leadership, ethical, and operational decisions on a daily basis
    5·1 answer
  • A down payment deposit from a potential buyer must be held in: Group of answer choices The seller's bank account The salesperson
    15·1 answer
  • using the aging of accounts receivable, Age Old, Inc. estimates that $90000 of its 4000000 of accounts receivable will be uncoll
    12·1 answer
  • 31. Why is a profit and loss statement useful for a business? (1 point)
    6·2 answers
  • A supplier is offering your firm a cash discount of 2 percent if purchases are paid for within ten days; otherwise, the bill is
    9·1 answer
  • A producer of pottery is considering the addition of a new plant to absorb the backlog of demand that now exists. The primary lo
    14·1 answer
  • True or False: It's always better to take a loan from a private bank to pay for your college tuition.
    9·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!