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a. You are given the following information in the table below for security A, B and C. The market portfolio has a standard deviation of
a. You are given the following information in the table below for security A, B and C. The market portfolio has a standard deviation of return at 18%. Security i Bi E(R) G(e;) A 0.9 6% 22% B 0.6 7% 8.5% 1.7 9% 18% Calculate the systematic risk for security A, B and C respectively. (3 marks) Interpret the e, and o(e) (2 marks) Which security has the highest Treynor ratio? (2 marks) b. You are given the following information for a hedge fund with high watermark requirement and a fee structure of "1 and 20". Based on the available information, please complete the following parts. i. Calculate the return for each year and also decide the high watermark; ii. iii. Calculate the management fee in dollars, assume it is 1%; Calculate the incentive fee net of management fee in dollars; iv. Lastly calculate the net returns to the investors. (13 marks) Year 1 Year 2 Year 3 300,000 285,000 325,000 Initial Value Ending Value 285,000 325,000 290,000 Return High Watermark Hurdle rate 10% 10% 10% Management fee ($) Incentive fee net of management fee ($) Net returns to investors Page 1 of 9 Year 4 290,000 322,000 10%
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