Answer:
(C) will probably have to accept a higher level of risk
Explanation:
Investing usually involve a trade-off between risk and return. Thus, relative to the guaranteed 3% rate of return offered by his bank, he will need to accept a higher level of risk to earn a higher return on his money.
Option A is incorrect because investing overseas may not earn a higher return, especially if the investment is in an oversea sovereign asset. Option B is incorrect because investing in a business with a very stable and predictable rate of return will likely yield a lower or similar rate of return as the bank savings account due to its low level of risk. Option D is incorrect as engaging in illegal activities does not necessarily guarantee a higher rate of return on a consistent basis.
Answer:
How much of the loss can Carlos deduct if the loan from the bank is non-recourse?<u> No deduction because he is not personally liable for debt or loan used in the trade that holds real property.</u>
How much does Carlos have at risk at the end of the first year? <u>$30000</u>
Answer:
2.6%
Explanation:
Jensen Measure is calculated using the below formula
Jensen Alpha = Rp - (Rf + beta*(Rm - Rf))
Where Rp = Return on portfolio = 20%, Rf = risk free rate = 3%, Beta = Beta of portfolio = 1.8 and Rm = Market return = 11%
Jensen Alpha = 20 - (3 + 1.8*(11-3))
Jensen Alpha = 20 - (3 + 1.8*8)
Jensen Alpha = 20 - (3 + 14.4)
Jensen Alpha = 20 - 17.4
Jensen Alpha = 2.6%
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