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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

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3 years ago
Present value is: a. The future value of a current amount of money evaluated at a given interest rate. b. The current value of a
pogonyaev

Answer:

Explanation:

Present value is calculated as the discounted sum of either a fixed amount or a series of payments in the future, at a given interest rates.

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An amount of $2,500 is deposited in a savings account that earns 2.5% interest. Which is the future value
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2 years ago
Use the following comparative figures for Apple and Google. Google 12.662 $ Key Figures Net income (in millions) Cash dividends
azamat

Answer and Explanation :

Few information is missing in the question kindly find the attachment

As per the data given in the question,

The formula and the computation is shown below

1) Book value per share = Equity applicable to share ÷ share outstanding

                                             Apple Google

Equity  common share a $134,047 $152,502

Common share outstanding b 5,126.201 694.783

Book value per common share a ÷ b $26.15 $219.50

2)Basic EPS = Net income ÷ weighted Avg common share outstanding

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weighted Avg common share outstanding b 5217.242 693.049

Basic EPS a ÷ b $9.27 $18.27

3)Dividend yield = Cash dividend per common share ÷ Market price per share

                                              Apple Google

Cash dividend per common share a 2.4 0

Market price per share b $154.12 $1046.4

Dividend yield a ÷ b 1.56% 0.00%

4) Price earning ratio = Market price per share ÷ Basic EPS

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Market price per share a $154.12 $1046.4

Basic EPS b 9.26754 18.26999

Price earning ratio a ÷ b 16.63 57.27

5) A higher PE ration indicates that investors want to pay a higher share price because of growth expectation in near by future

Therefore Google has higher PE ratio

Hence, investors have greater expectation of performance of Google in future.

4 0
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