Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Need help with the second part of the question please and thanks! 1. A mutual fund with beta of .8 has an expected rate of
Need help with the second part of the question please and thanks!
1. A mutual fund with beta of .8 has an expected rate of return of 14 percent. If rf=5 percent, and you expect the rate of return on the market portfolio to be 15 percent, should you invest in this fund? What is the fund's alpha? 2. What passive portfolio comprising a market-index portfolio and a money market account would have the same beta as the fund? Show that the difference betwees the expected rate of return on this passive portfolio and that of the fund equals the alpha from part (a) Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started