Questions from General Investment

Q: Calculate the contribution to total performance from currency, country, and

Calculate the contribution to total performance from currency, country, and stock selection for the manager in the example below. All exchange rates are expressed as units of foreign currency that can...

Q: Much of this chapter was written from the perspective of a U

Much of this chapter was written from the perspective of a U.S. investor. But suppose you are advising an investor living in a small country (choose one to be concrete). How might the lessons of this...

Q: Would a market-neutral hedge fund be a good candidate for

Would a market-neutral hedge fund be a good candidate for an investor’s entire retirement portfolio? If not, would there be a role for the hedge fund in the overall portfolio of such an investor?

Q: A hedge fund with net asset value of $62 per share

A hedge fund with net asset value of $62 per share currently has a high water mark of $66. Is the value of its incentive fee more or less than it would be if the high water mark were $67?

Q: Reconsider the hedge fund in Problem 10. Suppose it is January

Reconsider the hedge fund in Problem 10. Suppose it is January 1, the standard deviation of the fund’s annual returns is 50%, and the risk-free rate is 4%. The fund has an incentive fee of 20%, but it...

Q: Log in to Connect and link to Chapter 26 to find a

Log in to Connect and link to Chapter 26 to find a spreadsheet containing monthly values of the S&P 500 index. Suppose that in each month you had written an out-of-the-money put option on one unit of...

Q: Suppose a hedge fund follows the following strategy. Each month it

Suppose a hedge fund follows the following strategy. Each month it holds $100 million of an S&P 500 index fund and writes out-of-the-money put options on $100 million of the index with exercise price...

Q: The following is part of the computer output from a regression of

The following is part of the computer output from a regression of monthly returns on Waterworks stock against the S&P 500 index. A hedge fund manager believes that Waterworks is underpriced, with...

Q: Deployment Specialists pays a current (annual) dividend of $1

Deployment Specialists pays a current (annual) dividend of $1.00 and is expected to grow at 20% for 2 years and then at 4% thereafter. If the required return for Deployment Specialists is 8.5%, what i...

Q: Return to Problem 14. a. Suppose you hold an

Return to Problem 14. a. Suppose you hold an equally weighted portfolio of 100 stocks with the same alpha, beta, and residual standard deviation as Waterworks. Assume the residual returns (the e terms...