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Katen [24]
2 years ago
15

You currently own shares in Buckeye Mutual Fund (BMF). Your broker calls and recommends buying shares in a small-capitalization

fund managed by Wolverine Investment Group (WIG). Your broker says that this fund will provide significant diversification benefits for your existing holdings. She gives you the following statistics based on the performance of the two funds over the last year.
Portfolio E(return) Std. Dev.
Buckeye Mutual fund 20% 14%
Wolverine investment Grp. 12% 11%

Assume you can earn an average annual yield of 8% on a risk-free security. Which of these funds would be the optimal fund to combine with the risk-free security?

a. Buckeye
b. Wolverine
c. Neither Buckeye nor Wolverine
d. Both are equally good
e. There is not enough information to answer this question
Business
1 answer:
GarryVolchara [31]2 years ago
7 0

Answer:

Option D is the correct option

Explanation:

To find the optimal fund to combine with risk free rate of return, we will use Coefficient of variation,

Coefficient of variation(CoV) = Standard Deviation/Expected Return

CoV of Buckeye = 14%/20% = 0.7

CoV of Wolverine = 11%/12% = 0.9167

So, higher the CoV higher the risk, we will take Buckeye to combine with Risk Free Return.

Hence, Option A

- Required target return of portfolio = 22%

Risk Free return = 8%

Buckeye Return = 20%

Let the weight of Buckeye be X ,& weight of risk free be (1-X)

Required return = (WRF)*(RRF) + (WB)*(RB)

22 = (1-X)(8) + (X)(20)

22 = 8-8X + 20X

14 = 12X

X = 1.17

SO, weight of Buckeye is 1.17 or 117%

while weight of Risk free is -0.17 (1-1.17) or -17%

Hence, ans is OPTION D

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Answer

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2 years ago
Supply chain management refers to a set of approaches and techniques firms employ to efficiently and effectively integrate their
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Answer:

suppliers (or vendors)

Explanation:

Supply chain management refers to how the company manages:

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3 years ago
Carly’s Clips charges for their grooming services based on the following:________.
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Answer: $256

Explanation:

Using time and materials pricing, the total price for a job requiring 3 direct labor hours and $54 of materials will be calculated as:

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7 0
2 years ago
Shay is preparing to go into her meeting with her supervisor, Jill, to discuss her annual evaluation. She knows that there have
ehidna [41]

Shay was trying to: resist being defensive.

<h3><u>Explanation:</u></h3>

The term resist refers to the act of withstanding. It is an act through which a person fights firmly and strongly. The act through which an individual induces threats through the behaviour refers to be defensive. It makes them to be unique in the task they do. A person will be resist and defensive when he or she knows that their work is good enough and there will be no pint to prove them wrong or blamed.

In the given scenario, Shay knows that she performed better and he prepares herself not to be angry in the meeting held by her supervisor. She prepares herself with the entire question that will be asked her by the supervisor and how she must react to those questions. Thus, Shay was trying to: resist being defensive.

5 0
3 years ago
A corporation is considering expanding operations to meet growing demand. With the capital expansion, the current accounts are e
andre [41]

Answer:

B) a decrease of $40,000

Explanation:

As we Know Working capital is the the net or current assets and current liabilities.

Increase in Current Assets

Cash                              $20,000

Accounts receivable    $40,000

Inventories                   <u>$60,000</u>

Total Increase in CA   $120,000

Increase in Current Liabilities

Accounts payable       $50,000

Accruals                       $10,000

Long-term debt           <u>$100,000</u>

Total Increase in CA   $160,000

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As current Liabilities increased more than the current assets, so the working capital will decrease by $40,000

6 0
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