As an equity analyst, you have developed the following return forecasts and risk estimates for two different stock mutual funds (Fund T and Fund U): Fund T Fund U Forecasted Return 9.0% 10.0 CAPM Beta 1.20 0.80 a) If the risk-free rate is 3.9 % and the expected market risk premium is 6.1%, calculate the expected return for each mutual fund according to the CAPM b) Using the estimated expected returns from Part a along with your own return forecasts, explain whether Fund T and Fund U are Currently priced to fall directly on the security market line (SML), above the SML, or below the SML. Are Funds T and U overvalued, undervalued, or properly valued?
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- As an equity analyst, you have developed the following return forecasts and risk estimates for two different stock mutual funds (Fund T and Fund U): Forecasted Return CAPM Beta Fund T 9.00% 1.20 Fund U 10.00% 0.80 3.b. Decide which fund is overvalued, undervalued or properly valued and explain why?As an equity analyst, you have developed the following return forecasts and risk estimates for two different stock mutual funds (Fund T and Fund U): Forecasted Return CAPM Beta Fund T 9.00% 1.20 Fund U 10.00% 0.80 If the risk-free rate (RFR) is 3.9% and the expected market risk premium (ie., E(Ra) – RFR) is 6.1%, calculate the expected return for each mutual fund according to the 3.а. САРМ. 3.b. Decide which fund is overvalued, undervalued or properly valued and explain why?As an equity analyst, you have developed the following return forecasts and risk estimates for two different stock mutual funds (Fund T and Fund U}: Forecasted Return CAPM Beta Fund T 9.00% 1.20 Fund U 10.00% 0.80 a. If the risk-free rate is 3.9 percent and the expected market risk premium (£(RM) -RFR} is 6.1 percent, calculate the expected return for each mutual fund according to the CAPM. b. Using the estimated expected returns from part (a) along with your own return forecasts, demonstrate whether Fund T and Fund U are currently priced to fall directly on the security market line (SML), above the SML, or below the SML. c. According to your analysis, are Funds T and U overvalued, undervalued, or properly valued?
- As an equity analyst, you have developed the following return forecasts and risk estimates for two different stock mutual funds (Fund T and Fund U): Forecasted Return CAPM Beta Fund T 9.00% 1.20 Fund U 10.00% 0.80 f the risk-free rate (RFR) is 3.9% and the expected market risk premium (i.e., E(Ra) – RFR) is 6.1%, calculate the expected return for each mutual fund according to the 3.а. САРМ.CAPM As an equity analyst, you have developed the following return forecasts and risk estimates for two different stock mutual funds (Fund T and Fund U): Fund T Fund U Forecasted Return CAPM Beta 1.20 0.80 9.0% 10.0 a. If the risk-free rate is 3.9 percent and the expected market risk premium (E(RM)-RFR) is 6.1 percent, calculate the required return for each mutual fund according to the CAPM. b. Using the estimated required of returns from part (a) along with your return forecasts, demonstrate whether Fund T and Fund U are currently priced to fall directly on the security market line (SML), above the SML, or below the SML. c. According to your analysis, are Funds T and U overvalued, undervalued, or properly valued?Suppose you manage an equity fund with the following securities. Use the following data to help build an active portfolio. Input Data Vogt Industries Isher Corporation Hedrock, Incorporated Alpha 0.012 0.006 0.016 Beta 0.277 1.015 1.630 Standard Deviation 0.156 0.168 0.181 Residual Standard Deviation 0.117 0.048 0.113 Information Ratio 0.1026 0.1250 0.1416 Alpha/Residual Variance 0.877 2.604 1.253 Market Data S&P 500 Treasury Bills Expected Raturn 12.00% 2.50% Standard Deviation 20.00% 0.00% Required: Using the information in the table above, please first calculate the initial weight of each stock in an active portfolio, using the Treynor Black approach. Then adjust each weight for beta. (Use cells A5 to D14 from the given information to complete this question.) Treynor-Black Model Vogt Industries Isher Corporation Hedrock, Incorporated…
- Problem 3 )As an equity analyst, you have developed the following return forecasts and risk estimates for two different stock mutual funds (Fund T and Fund U): Forecasted Return CAPM Beta Fund T 9.00% 1.20 Fund U 10.00% 0.80 If the risk-free rate (RFR) is 3.9% and the expected market risk premium (i.e., E(Ra) – RFR) is 6.1%, calculate the expected return for each mutual fund according to the 3.а. САРМ. 3.b. Decide which fund is overvalued, undervalued or properly valued and explain why?Suppose you manage an equity fund with the following securities. Use the following data to calculate the information ratio of each stock. Input Data Vogt Industries Isher Corporation Hedrock, Incorporated Alpha 0.012 0.006 0.016 Beta 0.277 1.015 1.630 Standard Deviation 0.156 0.168 0.181 Residual Standard Deviation 0.117 0.048 0.113 Required: Using the information in the table above, please calculate the information ratio for each stock. (Use cells A5 to D8 from the given information to complete this question.) Vogt Industries Isher Corporation Hedrock, Incorporated Information RatioAs a fund manager in Bull & Bear Securities, you are given the following information regarding your portfolio. Rate of Return if State Occurs {:[" State of "],[" Economy "]:} {:[" Probability of "],[" State of Economy "]:} Stock A Stock B Stock C Boom .72 .06 .11 .17 Bust .28 .19 -.04 .23 Based on the above information, compute the following: i) The expected return in boom economy for all the three stocks. ii) The expected return in bust economy for all the three stocks. iii) The expected return for the portfolio that invest 30 percent each in A and B and 40 percent in C. iv) The standard
- You have been given the following return information for a mutual fund, the market index, and the risk-free rate. You also know that the return correlation between the fund and the market is .98. Year 2015 2016 Fund -23.60% Market -44.50% Risk-Free 1% 25.10 21.50 3 2017 14.40 15.40 2 2018 2019 7.00 -2.40 9.20 -6.20 6 2 Calculate Jensen's alpha for the fund, as well as its information ratio. (Do not round intermediate calculations. Enter the alpha as a percent rounded to 2 decimal places. Round the ratio to 4 decimal places.) Jensen's alpha Information ratio %You have been given the following return information for a mutual fund, the market index, and the risk-free rate. You also know that the return correlation between the fund and the market is 0.97. Year 2018 2019 2020 2021 2022 Fund -15.2% 25.1 12.4 6.2 -1.2 Sharpe ratio Treynor ratio Market Risk-Free 1% 3 2 4 2 -24.5% 19.5 9.4 7.6 -2.2 What are the Sharpe and Treynor ratios for the fund? Note: Do not round intermediate calculations. Round your answers to 4 decimal places.You have been given the following return information for a mutual fund, the market index, and the risk-free rate. You also know that the return correlation between the fund and the market is 0.97. Year Fund Market Risk-Free 2018 15.13% -25.5% 2% 2019 25.1 2020 12.5 2021 6.4 2022 -1.26 19.6 9.7 7.6 4 2 4 -2.2 3 What are the Sharpe and Treynor ratios for the fund? Note: Do not round intermediate calculations. Round your answers to 4 decimal places.