3. Compute expected return of the hedge fund on December 31, 2020 (this is the return that the hedge fund expects to earn over the year 2021). The answer should be given in decimal form (e.g., 1 % is 0.01). Hint: the sign matters!

Consider the following information regarding a hedge fund: Time Security A Security B Security C 12/31/2020 Long position $30 Long position $70 Short position $50 Actual realized) return 12/1/2020-12/31/2020 10 % 5 % -7.5 % 1/1/2021-1/31/2021 20 % 10 % -15% Arithmetic average return 1/1/2015-12/31/2020 5 % 2.5 % -3.75 % Historical (sample) Std. Dev. 1/1/2015-12/31/2020 20 % 10 % 15 % Estimated CAPM Beta 1/1/2015-12/31/2020 1 0.5 0.3 Consider the following information regarding a hedge fund: Time Security A Security B Security C 12/31/2020 Long position $30 Long position $70 Short position $50 Actual realized) return 12/1/2020-12/31/2020 10 % 5 % -7.5 % 1/1/2021-1/31/2021 20 % 10 % -15% Arithmetic average return 1/1/2015-12/31/2020 5 % 2.5 % -3.75 % Historical (sample) Std. Dev. 1/1/2015-12/31/2020 20 % 10 % 15 % Estimated CAPM Beta 1/1/2015-12/31/2020 1 0.5 0.3