Robin Hood Funds believes in the CAPM, presently has a fund beta equal to 1.3, and regularly
Fantastic news! We've Found the answer you've been seeking!
Question:
Robin Hood Funds believes in the CAPM, presently has a fund beta equal to 1.3, and regularly engages in a strategy of market timing.If US T-bill rates are 1% per annum, they forecast the market to yield -7% next year and are restricted by their charter to betas between [0.3,2] what strategy will they pursue and what is their expected return?
a They will increase their beta and expect a return of -9.1%
b They will carry more market risk and realize a return of -8.1%
c They will eliminate idiosyncratic risk and achieve a return of -2.1%
d They will rotate to defensive industries and expect to lose -1.1%
e Unable to determine with the information provided
answer d, but why..? urgent, had midterm 1h later..
Posted Date: