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enot [183]
3 years ago
10

Portfolio standard deviation and diversification: You are asked to give financial advice to a mutual fund manager. The fund has

had a history of investing in an equally-weighted portfolio of 50 stocks and is considering cutting down the number of stocks to 10 or 20. You assume that all stocks the fund is considering investing in have the same standard deviation of 40% and that the correlation between each pair of stocks is identical and equal to 0.25.
a. To start your analysis, you calculate the standard deviation of the equally weighted portfolios with 10, 20, and 50 assets.

b. Given your answers to part a. what is the advice that you give the mutual fund manager?

Business
1 answer:
Debora [2.8K]3 years ago
5 0

Answer:

a) check attachment below

b) Whenever we have  a portfolio whatsoever, that minimizes the variance of the portfolio is always preferred. Therefore, the portfolio of 50 stock is better than portfolio of 20 stocks which is as well better than the 10 stocks portfolio. The fund manager especially the mutual fund manager should not consider cutting down the number of stocks. If reducing the number of  stock is very urgent then he should probably consider reducing it down to  20 as it is variance is less than that of 10 stocks portfolio.

Explanation:

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Suppose the central bank implements expansionary monetary policy where the money supply increases. Which of the following will t
natka813 [3]

Answer:

D they both will increase

Explanation:

Goodluck on that.

4 0
2 years ago
Match the various information flows to the smart TV purchase steps. Store to Manufacturer Buyer to Manufacturer Manufacturer to
Ray Of Light [21]

Answer:

Please refer the detail answer below

Explanation:

Store to Manufacturer  ------ Request delivery schedule

Buyer to Manufacturer  ------- Frequent, direct reorder

Manufacturer to Distribution Center and Buyer ------ Advanced shipping notice

Store to Distribution Center ----- Corporate inventory order

Customer to Store  ----- Smart TV purchased

Store to Buyer ------ POS terminal sends data

4 0
3 years ago
The following data were taken from the records of Menendez Company:
nydimaria [60]

Answer: a. $1,500

Explanation:

Working capital is calculated by deducting current liabilities from current assets. It is meant to show the operating liquidity of a company within a period.

Working capital = Current assets - Current liabilities

= 5,000 - 3,500

= $1,500

3 0
3 years ago
Among the costs Kunee Company incurred during the month of August were the following: $15,000 - coolant used in the headquarters
uranmaximum [27]

Answer: Option (B) is correct.

Explanation:

Given that,

Coolant (used in the office air-conditioning system) cost  = $15,000

Property taxes on factory building = $45,000

Depreciation on trucks = $10,000

Salary paid = $2,000

Period cost = Coolant cost + Depreciation on trucks

                   = $15,000 + $10,000

                   = $25,000

6 0
3 years ago
Ganado and Equity Risk Premiums. Maria​ Gonzalez, Ganado's Chief Financial​ Officer, estimates the​ risk-free rate to be 3.50 %​
Elza [17]

Answer:

WACC (CAPM) 5.2%

WACC (ICAPM) 5.03%

Explanation:

The weighted average cost of capital is

Ke * E/ E+D + Kd * (1 -t) D / E+D

Ke = Rf + (Rm - Rf) * \beta

Ke (CAPM) = 3.50% + (8% - 3.50%) * 1.12

Ke (CAPM) = 7.532%

Kd (CAPM) = Kd (1-t)

Kd (CAPM) = 7.60 (1-39%)

Kd (CAPM) = 4.636%

WACC (ICAPM) : 7.532 * 20% + 4.636 * 80%

WACC (CAPM) = 5.2164%

Ke (ICAPM) = 3.50% + (8% - 3.50%) * 0.86

Ke (ICAPM) = 6.596%

Kd (ICAPM) = Kd (1-t)

Kd (ICAPM) = 7.60 (1-39%)

Kd (ICAPM) = 4.636%

WACC (ICAPM) : 6.596 * 20% + 4.636 * 80%

WACC (CAPM) = 5.03%

7 0
3 years ago
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