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FIN515 Quantitative Finance Assignment 01 1. Suppose you have 5-year annual data on the excess returns on a fund manager's portfolio (fund ABC) and the excess returns on a market index (where is the retum on fund ABC, r, is the risk-free rate and is the return on the market index): Excess return on fund ABC Excess return on market index Pac- Year 1 2 3 4 5 14,0 32.0 11.6 21.2 17.4 16.0 21.7 6.0 16.2 11.0 What is the estimated alpha (a ) for Fund ABC? (1 Mark) 2. Given the data in Question 1, what is the estimated beta (B) of Fund ABC? (1 Mark) 3. Suppose that the unbiased estimator of the standard deviation of the disturbance (s) is 5.1. What is the nearest value to the standard errors of the estimated CAPM alpha (a) of Fund ABC from Question 1? (1.5 Mark) + The estimated alpha (a) and beta () of a nival fund, Fund DEF, are 2.3 and 3.1, respectively. If the expected market risk premium is 12%, what would we expect the excess return of Fund DEF to be? (1.5 Mark)