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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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On October 5, Cullumber Company buys merchandise on account from Marin Company. The selling price of the goods is $6,650, and th
andreev551 [17]

Answer:

October 5 entries

Debit Accounts receivable  $6,650

Credit Sales Revenue                     $6,650

To record sales

Debit Cost of goods sold       $3,010

Credit Inventory            $3,010

To record the cost of sales

October 8 entries

Debit Sales return   $840

Credit Accounts receivable  $840

To record sales reversal due to sales return

Debit Inventory   $430

Credit Cost of goods sold   $430

Explanation:

The perpetual inventory system is the one that ensures that the book balance for inventory is adjusted for every purchase, sale or return of inventory.

When inventory is sold on account, the entries required are debit accounts receivable and credit revenue then Debit cost of goods sold and credit inventory.

8 0
3 years ago
Jennifer Schwab is an investor in The Handy Man Pro Shops. On January 1, she purchased 225 shares of stock at a price of $15 per
Tju [1.3M]

Answer:

C. $3,375

Explanation:

Calculation for the value of this stock on the company's balance sheet on December 31

Stock value= 225 shares* $15 per share

Stock value=$3,375

Therefore the value of this stock on the company's balance sheet on December 31 will be $3,375

5 0
3 years ago
In a free market economy, the market, not the
mylen [45]
In a free market economy, the market, not the government, determines prices. The interaction of producers and consumers determine the price in the market.
8 0
3 years ago
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Rajan Company's most recent balance sheet reported total assets of $2.10 million, total liabilities of $0.70 million, and total
andrew11 [14]

Answer:

0.5.

Explanation:

Assets - Liabilities = Owner's Equity.

As the name states, the debt to equity ratio is simply obtained by dividing total debt (liabilities) by the total equity, total assets should not be included:

DER = \frac{0.70}{1.40} =0.5

Rajan Company's  debt to equity ratio is 0.5.

4 0
3 years ago
Which control standard is stated most effectively?
MaRussiya [10]

The  control standard that is stated most effectively is: Increase sales of our top-end product from 2000 in the first quarter to 3000 during the same period by 2024.

<h3>What is meant by the term control standard?</h3>

This is the term that is used to refer to all of the set standards in an organization that has the ability of taking care of several measures as well as their control and all forms of corrective measures.

It helps in the comparison of the subsequent performance with the performance that used to exist.

Hence we would say that the answer is Increase sales of our top-end product from 2000 in the first quarter to 3000 during the same period by 2024.

Read more on control standard here: brainly.com/question/28593978

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3 0
1 year ago
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