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Suppose that every time a fund manager trades stock, transaction costs such as commissions and bid ask spreads amount to 2.8% of the value of
Suppose that every time a fund manager trades stock, transaction costs such as commissions and bid ask spreads amount to 2.8% of the value of the trade of the portfolio turnover rate is 50%, by how much is the total return of the portfolio reduced by trading costs? Hint if the turnover rate is 50% this means that on average, 50% of the portfolio is sold and replaced with other securities each year. (Do not round Intermediate calculations. Enter your answer as a decimal rounded to four decimal places) Total return reduced by trading costs
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