Question

A mutual fund has earned an annual average return of 15% over the last 5 years. During that time, the average risk-free rate was 2% and the average market return was 12% per year. The correlation coefficient between the mutual fund’s and market’s returns was 0.7. The standard deviation of returns was 30% for the mutual fund and 22% for the market. What was the fund’s CAPM alpha?

Answer #1

Given about mutual fund,

actual return Ra = 15%

Standard deviation SDa = 30%

Expected return on market Rm = 12%

Standard deviation of market SDm = 22%

Correlation of mutual fund with market p = 0.7

=> So, beta of mutual fund is calculates using formula

Beta of mutual fund = p * SDa/SDm = 0.7*30/22 = 0.9545

Risk free rate = 2%

So, using CAPM, expected return on mutual fund E(r) = Rf + Beta*(Rm - Rf)

=> E(r) = 2 + 0.9545*(12 - 2) = 11.54%

CAPM alpha on mutual fund = actual return - expected return = 15 - 11.54 = 3.45%

A mutual fund has earned an annual average return of 15% over
the last 5 years. During that time, the average risk-free rate was
2% and the average market return was 12% per year. The correlation
coefficient between the mutual fund’s and market’s returns was 0.7.
The standard deviation of returns was 45% for the mutual fund and
22% for the market. What was the fund’s CAPM alpha?

A mutual fund has earned an annual average return of 15% over
the last 5 years. During that time, the average risk-free rate was
2% and the average market return was 12% per year. The correlation
coefficient between the mutual fund’s and market’s returns was 0.7.
The standard deviation of returns was 45% for the mutual fund and
22% for the market. What was the fund’s CAPM alpha?

A mutual fund has earned an annual average return of 15% over
the last 5 years. During that time, the average risk-free rate was
2% and the average market return was 12% per year. The correlation
coefficient between the mutual fund’s and market’s returns was 0.7.
The standard deviation of returns was 50% for the mutual fund and
22% for the market. What was the fund’s CAPM alpha?
a) -2.9%
b) -1.3%
c) 0.3%
d) 1.9%
e) 3.5%

A mutual fund has earned annual returns of 11%, -5% and 15% over
the past three years. If the average risk-free rate during that
time was 2% per year, what was this fund's Sharpe Ratio during that
time period?

A mutual fund has earned annual returns of 11%, -5% and 15% over
the past three years. If the average risk-free rate during that
time was 2% per year, what was this fund's Sharpe Ratio during that
time period?
a) 0.47
b) 0.51
c) 0.53
d) 0.56
e) 0.58

A mutual fund has earned annual returns of 11%, -5% and 15% over
the past three years. If the average risk-free rate during that
time was 2% per year, what was this fund's Sharpe Ratio during that
time period?
a) 0.47
b) 0.51
c) 0.53
d) 0.56
e) 0.58

A mutual fund has earned annual returns of 11%, -5% and 33% over
the past three years. If the average risk-free rate during that
time was 2% per year, what was this fund's Sharpe Ratio during that
time period?

A mutual fund has earned annual returns of 11%, -5% and 27% over
the past three years. If the average risk-free rate during that
time was 2% per year, what was this fund's Sharpe Ratio during that
time period?

A mutual fund has earned annual returns of 11%, -5% and 21% over
the past three years. If the average risk-free rate during that
time was 2% per year, what was this fund's Sharpe Ratio during that
time period?
a) 0.47
b) 0.51
c) 0.53
d) 0.56
e) 0.58

A mutual fund has earned annual returns of 11%, -5% and 27% over
the past three years. If the average risk-free rate during that
time was 2% per year, what was this fund's Sharpe Ratio during that
time period?
a) 0.47 b) 0.51 c) 0.53 d) 0.56 e) 0.58

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 3 minutes ago

asked 4 minutes ago

asked 16 minutes ago

asked 17 minutes ago

asked 36 minutes ago

asked 53 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 2 hours ago

asked 2 hours ago