Question
If the risk-free rate is 6%, the Treynor Index for the market portfolio with a realized return of 10% will be: Assume that you anticipate
- If the risk-free rate is 6%, the Treynor Index for the market portfolio with a realized return of 10% will be:
- Assume that you anticipate the stock prices to go down in the next three months and instead of selling your portfolio now and then repurchasing it back in three months, you plan to cross hedge your $100,000 portfolio with a beta of 1.2 against the decline in prices. The stock index futures contract has a multiplier of 100 and a price of $50. How many contracts should you short or long?
a. 24 contracts to be short
b. 20 contracts to be short
c. 20 contracts to be long
d. 24 contracts to be long
3) Assume that the risk-free rate of return is 8%, the expected return on the market portfolio is 13% and the standard deviation of the market return is 0.25. For the expected return on the market portfolio to increase by 7.69% with no other change:
Select one:
a. the equilibrium price of total risk in the market should increase to 0.24
b. the equilibrium price of total risk in the market should increase to 0.20
c. the equilibrium price of systematic risk in the market should increase to 0.24
d. the equilibrium price of systematic risk in the market should increase to 0.20
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