Questions from General Investment

Q: Your client (see previous problem) wonders whether to switch the

Your client (see previous problem) wonders whether to switch the 70% that is invested in your fund to the index portfolio. a. Explain to your client the disadvantage of the switch. b. Show your clie...

Q: What do you think would happen to the expected return on stocks

What do you think would happen to the expected return on stocks if investors perceived an increase in the volatility of stocks?

Q: You manage an equity fund with an expected risk premium of 10

You manage an equity fund with an expected risk premium of 10% and a standard deviation of 14%. The rate on Treasury bills is 6%. Your client chooses to invest $60,000 of her portfolio in your equity...

Q: What is the reward-to-volatility (Sharpe) ratio

What is the reward-to-volatility (Sharpe) ratio for the equity fund in the previous problem?

Q: The real interest rate approximately equals the nominal rate minus the inflation

The real interest rate approximately equals the nominal rate minus the inflation rate. Suppose the inflation rate increases from 3% to 5%. Does the Fisher equation imply that this increase will result...

Q: Calculate the means and standard deviations of the four style indices in

Calculate the means and standard deviations of the four style indices in Table 5.4 (e.g., Big/Small, Value/Growth) for the same sub periods as in Table 5.5. a. Have Small/Growth stocks provided consi...

Q: Hennessy & Associates manages a $30 million equity portfolio for the

Hennessy & Associates manages a $30 million equity portfolio for the multimanager Wilstead Pension Fund. Jason Jones, financial vice president of Wilstead, noted that Hennessy had rather consistently...

Q: Convert the nominal returns on the broad market index to real rates

Convert the nominal returns on the broad market index to real rates. Reproduce the last column of Table 5.3 using real rates. Compare the results to those of Table 5.3. Are real or nominal returns mor...

Q: For each style portfolio, are real or nominal returns more volatile

For each style portfolio, are real or nominal returns more volatile during each subperiod of Table 5.5?

Q: Download the annual returns for the years 1927–2018 on the

Download the annual returns for the years 1927–2018 on the combined market index (of the NYSE/NASDAQ/AMEX markets) as well as the S&P 500 from Connect. For both indexes, calculate: a. Average return....