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Suppose that the borrowing rate that your client faces is 9%. Assume that the S&P 500 index has an expected return of 14% and standard
Suppose that the borrowing rate that your client faces is 9%. Assume that the S&P 500 index has an expected return of 14% and standard deviation of 21%. Also assume that the risk-free rate is rf = 6%. Your fund manages a risky portfolio, with the following details: E(rp) = 11%, p = 17%.
What is the largest percentage fee that a client who currently is lending (y < 1) will be willing to pay to invest in your fund? What about a client who is borrowing (y > 1)?
y<1= ____%
y>1=_____%
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