Question
Suppose you are a portfolio manager of the following investment fund. The fund is invested in three tracking stocks with the following investments and betas:
Suppose you are a portfolio manager of the following investment fund. The fund is invested in three tracking stocks with the following investments and betas:
| Stock | Shares | Price per share | Beta |
| XLI (Industrial sector SPDR) | 50,000 | $80.00 | 1.20 |
| XLP (Consumer Staples sector SPDR) | 20,000 | $160.00 | .60 |
| BIL (T-Bill spider) | 100,000 | $28.00 | 0.00 |
The market risk premium is 5% and the risk-free rate is 2%.
- Calculate the funds beta and expected rate of return?
- Using XLI and BIL, design a portfolio (calculate the weights) with a beta 0.95.
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
Understanding Financial Risk Management
Authors: Angelo Corelli
1st Edition
0415746183, 978-0415746182
