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Ghella [55]
2 years ago
7

Assume that the economy has three types of people. 20% are fad followers, 75% are passive investors, and 5% are informed traders

. The portfolio consisting of all informed traders has a beta of 1.4 and an expected return of 16%. The market has an expected return of 10% and the risk-free rate is 4%. The alpha for the informed investors is closest to:
Business
1 answer:
Ratling [72]2 years ago
8 0

Answer:

3.6%

Explanation:

The computation of the alpha for the informed investors is shown below:

As we know that

Expected rate of k = Risk free rate of return + Beta × (Market rate of return - Risk free rate of return) + Alpha

16% = 4% + 1.4 × (10% - 4%) + Alpha

16% = 4% + 8.4% + Alpha

16% = 12.4% + Alpha

So,

Alpha = 3.6%

We simply applied the above formula to determine the alpha

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Answer:

C) The market learing price may rise, fall, or stay the same, but the equilibrium quantity will rise. 

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An increase in demand would lead to an increase in demand and price.

An increase in supply would lead to an increase in supply and a fall in price.

The combined effect would lead to an increase in equilibrium quantity but the effect on equilibrium price would be indeterminate.

I hope my answer helps you

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3 years ago
A store asked 250 of its customers to study the relationship between the amount spent on groceries and income. a meaningful disp
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To know more about scatterplot

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8 0
1 year ago
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2 years ago
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If net operating income is $83,000, average operating assets are $415,000, and the minimum required rate of return is 13%, what
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Answer:

$29,050

Explanation:

The computation of the residual income is shown below:

Residual income = Net operating income - Minimum required income  

= $83,000 - $53,950  

= $29,050  

Here

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= $415,000 × 13%    

= $53,950

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