1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Readme [11.4K]
3 years ago
15

Greta, an elderly investor, has a degree of risk aversion of a = 3 when applied to return on wealth over a one-year horizon. She

is pondering two portfolios, the s&p 500 and a hedge fund, as well as a number of one-year strategies. (all rates are annual and continuously compounded.) the s&p 500 risk premium is estimated at 5% per year, with a sd of 20%. The hedge fund risk premium is estimated at 10% with a sd of 35%. The returns on both of these portfolios in any particular year are uncorrelated with its own returns in other years. They are also uncorrelated with the returns of the other portfolio in other years. The hedge fund claims the correlation coefficient between the annual returns on the s&p 500 and the hedge fund in the same year is zero, but greta is not fully convinced by this claim. Compute the estimated annual risk premiums, sds, and sharpe ratios for the two portfolios
Business
1 answer:
Mars2501 [29]3 years ago
5 0

Answer:

<u>Risk premiums </u>= Alpha A x Risk Premium

S&P Portfolio Risk premiums = 3 x 5% = 15%

Hedge Fund Portfolio Risk premiums = 3 x 10% = 30%

<u>SDs</u> = Sd x √(A)

S&P Portfolio = 20% x √(3) = 34.64%

Hedge Fund Portfolio = 35% x √(3) = 60.62%

<u>Sharpe ratios </u>= Risk premium / SDs

S&P Portfolio = 15% / 34.64% = 0.43

Hedge Fund = 30% / 60.62% = 0.49

You might be interested in
A store asked 250 of its customers how much they spend on groceries each week. the responses were also classified according to t
denis-greek [22]
Yes, I think there is a relationship between amount spent on groceries and gender because boys tend to eat more than the girls.
5 0
3 years ago
What does limited liability mean?
shutvik [7]

It basically means that, if you are a shareholder of a certain business, you are only a liability up to the extent where your shares hold you to

4 0
3 years ago
hi everyone! i am leaving brainly once and for all this will be my last post good bye friends and the unknown.
laiz [17]

Answer:

Byee

Explanation:

8 0
2 years ago
Read 2 more answers
If your 60-year-old customer purchases a nonqualified variable annuity and withdraws some of her funds before the contract is an
Svetlanka [38]

Answer: Ordinary income tax on earnings exceeding basis.

Explanation:

From the question, we are informed that a 60-year-old customer purchases a nonqualified variable annuity and withdraws some of her funds before the contract is annuitized.

The consequences of this action is that Ordinary income tax on earnings exceeding basis. It should be note that the distributions from a nonqualified plan had to do with return on original investment and income from the investment. Since there's defer of the income, it'll be taxable as an ordinary income.

5 0
3 years ago
If, as the economic problem states, we have limited resources, but unlimited wants, what does this make individuals and societie
rjkz [21]

Answer:256 yes u can and this is wrong

Explanation:

256+698+625+9566

8 0
2 years ago
Read 2 more answers
Other questions:
  • Your portfolio is comprised of 36 percent of Stock X, 18 percent of Stock Y, and 46 percent of Stock Z. Stock X has a beta of 1.
    10·1 answer
  • How long does it take to get a suit dry cleaned?
    13·1 answer
  • In a statement of cash flows: Multiple Choice No noncash transactions are reported in the statement itself or the related footno
    9·1 answer
  • The only difference between variable and absorption costing is the expensing of ________.A) direct manufacturing costs B) variab
    12·1 answer
  • The company allocates manufacturing overhead using a single plantwide rate with direct labor cost as the allocation base. Estima
    6·1 answer
  • Question 13 when the total u.s. production of goods and services is divided into consumption goods and services, capital goods,
    9·1 answer
  • ) In April of 2019, Mike acquired a machine for $30,000 to use in his business. It is the only plant asset he purchased this yea
    14·1 answer
  • A bank can offer which of the following
    14·1 answer
  • I met a girl and she said '' omg, are you a cookie?''<br> then she show this image to me..
    5·1 answer
  • Government involvement in a modern economy is generally defended because:.
    7·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!