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Wewaii [24]
3 years ago
6

Assuming that monthly returns are approximately normally distributed, what is the probability that this market-neutral strategy

will lose money over the next month
Business
1 answer:
Levart [38]3 years ago
6 0

The following is part of the computer output from a regression of monthly returns on Waterworks stock against the S&P 500 index. A hedge fund manager believes that Waterworks is underpriced, with an alpha of 2% over the coming month.

Beta = 0.75

R-square = 0.65

Standard Deviation of Residuals = 0.06 (i.e., 6% monthly)

Assuming that monthly returns are approximately normally distributed, what is theprobability that this market-neutral strategy will lose money over the next month?

Assume the risk-free rate is .5% per month.

Answer:

0.33853

Explanation:

Given that, the expected rate of return of the market-neutral position is equal to the risk-free rate plus the alpha:

0.5%+ 2.0% = 2.5%

Hence, since we assume that monthly returns are approximately normally distributed.

The z-value for a rate of return of zero is

−2.5%/6.0% = −0.4167

Therefore, the probability of a negative return is N(−0.4167) = 0.33853

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Which of the following terms describes making false statements about the financial condition of any insurer that are intended to
Marysya12 [62]

Answer:

The answer to this question is Defamation

Explanation:

Defamation refers to any statement (Whether written or verbal) that is untrue and injurious  to any of the parties involved in the insurance business.

A statement is said to be a Defamatory statement if it is false especially regarding the financial condition of the insurer.

Identifying defamatory statement

  • Statements must be untrue
  • it must be capable of causing damage of injury to person or business.
5 0
3 years ago
In 20X5, Elm Corp. bought 10,000 shares of Oil Corp. at a cost of $20,000. On January 15, 20X6, Elm declared a property dividend
xxMikexx [17]

Answer:

c) $25,000

Explanation:

A property dividend should be recorded in retained earnings at the property's  <u>market value at date of declaration.</u>

<u>The date of declaration is the date on which the firm has made the commitment to pay the dividend. The market value on this date is the value that was considered when the board made the decision to distribute a property dividend and thus is the appropriate measure of the sacrifice to the firm. </u>

<u> </u>In application to the scenario, <u>the property dividend will be recorded in retained earnings at the market value at the date of declaration which is Jan 15 </u>NOT on the day it is payable.

Hence, retained earnings will reduce by $25,000

In 20X5, Elm Corp. bought 10,000 shares of Oil Corp. at a cost of $20,000. On January 15, 20X6, Elm declared a property dividend of the Oil stock to shareholders of record on February 1, 20X6, payable on February 15, 20X6. During 20X6, the Oil stock had the following market values:  

January 15

$25,000

February 1

26,000

February 15

24,000

6 0
3 years ago
Which of these describes the costs and benefits of getting a mortgage?
lianna [129]

Answer:

B

Explanation:

Mortgages prevent government regulation of property but involve higher taxes

6 0
2 years ago
Movie tickets and film streaming services are substitutes. If the price of film streaming increases, what happens in the market
alexdok [17]

Answer:

Since no one would be buying the movie tickets then the market would go down and probably crash. hope this helps!

6 0
2 years ago
As a young child, Hermes suffered from severe allergies and required weekly visits to a clinic in order to receive injections. A
OverLord2011 [107]

Answer: Classic conditioning

Explanation: Classic conditioning is a state of mental disorder caused by some incident leading to phobias, sudden anger or sexual arousal.

In the given case, Hermes had a phobia to go to a doctor's office which is caused by some bad experiences in childhood. Thus, we can conclude that the behavior of hermes explained is an example of classic conditioning.

8 0
4 years ago
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