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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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management of the money supply

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Consider two economic regions, region A and region B. If region A has strict union protection laws present, while region B lacks
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Answer:

higher unemployment rate

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3 years ago
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Determine the missing amounts.Unit SellingPriceUnit VariableCostsUnit ContributionMarginContribution MarginRatio1. $650 $390 $en
tatiyna

Answer:

I tried to order the information and prepared the following table:

                                                  Product A           Product B        Product C

Unit Selling Price =                        $650                $200              <u>e)$2,300</u>

Unit Variable Costs =                    $390               <u>c)$108</u>              <u>f)$1,495</u>

Unit Contribution Margin =          <u>a)$260</u>                  $92                $805

Contribution Margin Ratio =         <u>b)40%</u>               d)<u>46%</u>                 35%

contribution margin ratio = (revenue - cogs) / revenue     or      

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8 0
3 years ago
Neutrino Industries stock trades at $49 per share and there are 120 million shares outstanding. The management would like to rai
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Answer:

Neutrino Industries must sell <u>8.68 million shares</u> to raise $400 million.

Explanation:

To calculate this, let B represents the number of shares Neutrino Industries must sell. Therefore, we have:

Gross proceeds = $49 * B, or $49B

Underwriter charges = 6% * $49B = $2.94B

To raise $400 million, we deduct the underwriter charges from gross proceeds and solve for B as follows:

$49B – $2.94B = $400,000,000

$46.06B = 400,000,000

B = 400,000,000 / 46.06

B = 8,684,324.79 shares, or 8.68 million shares.

Therefore, Neutrino Industries must sell <u>8.68 million shares</u> to raise $400 million.

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