answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Karo-lina-s
1 month ago
6

The Optima Mutual Fund has an expected return of 20%, and a volatility of 20%. Optima claims that no other portfolio offers a hi

gher Sharpe ratio. Suppose this claim is true, and the risk-free interest rate is 5%.
a. What is Optima’s Sharpe Ratio?
b. If eBay’s stock has a volatility of 40% and an expected return of 11%, what must be its correlation with the Optima Fund?
c. If the SubOptima Fund has a correlation of 80% with the Optima Fund, what is the Sharpe ratio of the SubOptima Fund?
Business
1 answer:
Mariulka [3.1K]1 month ago
6 0

Answer:

(a) 0.75

(b) 0.2

(c) 0.6

Explanation:

(a) For the Sharpe ratio calculation -

Given:

Expected return = 20%,

Risk-free rate = 5%,

Volatility = 20%

Sharpe ratio = (Mean portfolio return - Risk-free return) ÷ Standard deviation of portfolio

Sharpe Ratio = (20% - 5%) ÷ 20%

= 0.75

(b) Given:

Standard deviation = 40%,

Portfolio return = 11%,

The risk-free return remains at 5%

Sharpe Ratio of eBay = (11% - 5%) ÷ 40%

Sharpe Ratio of eBay = 0.15

Correlation of eBay with Optima fund:

= Sharpe ratio of eBay ÷ Sharpe ratio of Optima fund

= 0.15 ÷ 0.75

= 0.2

(c) The correlation of the Sub-Optima fund with the Optima fund is 80%,

Sharpe ratio for the Optima = 0.75

Correlation of the Sub-Optima fund with the Optima fund:

= Sharpe ratio of Sub-Optima fund ÷ Sharpe ratio of Optima fund

0.80 = Sharpe ratio of Sub-Optima fund ÷ 0.75

Sharpe ratio of the Sub-Optima fund = 0.80 × 0.75

= 0.6

You might be interested in
Imagine you've just gotten the first glimpse at your upcoming report card or transcript. 1. What are your steps for reviewing it
Mariulka [3175]

Answer:

Steps to Review:

  1. Check for the unweighted GPA and Total GPA
  2. Examine individual grades by semester and overall GPA
  3. Review the marks explanation
  4. Finally, read the comments provided in the report

Sections of Interest:

  • Total GPA
  • Grades in specific subjects like Computer Science, Commerce, and Chemistry.
  • Teacher comments

What Matters to Me:

  • Aim to pass all subjects to minimize my teachers' frustrations.

What Matters to My Parents:

  • Ensure I succeed in all subjects with the best possible grades.

Steps If Something Seems Off:

  • First, investigate personally; for example, if a grade doesn’t match expectations, review the term papers to confirm results.
  • If necessary, approach the relevant authority to express concerns.
4 0
1 month ago
High flyer, inc., wishes to maintain a growth rate of 16 percent per year and a debt-equity ratio of 0.90. the profit margin is
marusya05 [3091]
The dividend payout ratio calculates to be 46.19%. The procedure involves applying the DuPont identity to obtain this figure. Initially, one utilizes the DuPont identity of RoE. The debt ratio is equivalently represented in another form where D/E denotes the Debt-Equity Ratio. By substituting the D/E ratio from the question into the debt ratio formula, one can derive the relationship between RoE and the earnings growth rate g via a formula, where p is the dividend payout ratio. Plugging in the necessary values yields p = 0.461988304 or 46.19%.
3 0
17 days ago
Sam has decided to buy a burger and fries at a​ restaurant, but he is considering whether to buy a drink as well. Suppose the pr
Free_Kalibri [3151]
The marginal cost of the drink is calculated as follows: the burger is priced at $3.00, the fries are at $1.50, and the drink at $2.00, while a combo meal inclusive of all items costs $4.99. Thus, to find the marginal expense of the drink, we take the cost of the value meal and subtract the burger and fries' costs: $4.99 - $3 - $1.50 amounts to $0.49.
4 0
8 days ago
For each of the following events, identify which of the determinants of demand or supply are affected. If demand is unaffected b
Nady [2956]

Answer:

(1) Demand Determinant - Number of purchasers

Supply Determinant - None

If individuals opt to have additional children, this results in an increased number of purchasers. Consequently, this influences the demand for a specific product, causing the demand curve to shift to the right.

(2) Supply Determinant - Prices of inputs

Demand Determinant - None

Steel is a key resource for companies, and if steel prices rise, production costs will increase, leading to a decrease in product supply.

(3) Supply Determinant - Technological advancements

Demand Determinant - None

Innovative technology will enhance firms' productivity, thereby increasing product supply.

(4) Demand Determinant - Pricing of substitute or complementary products

Supply Determinant - None

When the price of a substitute product goes up, the demand for minivans rises, resulting in a shift of the demand curve to the right.

(5) Demand Determinant - Changes in income

Supply Determinant - None

A decline in consumer wealth leads to diminished demand for minivans, prompting a leftward shift of the demand curve.

3 0
1 month ago
The Porters’ food, clothing, and medical expenses are not fixed expenses. Explain what type of expense they are, and why.
soldi70 [3139]

Answer:

Such expenses are variable, as they can fluctuate based on living circumstances.

4 0
1 month ago
Other questions:
  • White Company has two departments, Cutting and Finishing. The company uses a job-order costing system and computes a predetermin
    8·1 answer
  • This​ year, Druehl,​ Inc., will produce 57 comma 60057,600 hot water heaters at its plant in​ Delaware, in order to meet expecte
    7·1 answer
  • Giada is at an extracurricular activity fair for her high school and is trying to decide which clubs to join. Her hobbies includ
    12·1 answer
  • Each Component (Services/Agencies) uses the guidance provided by the Planning phase of the Planning, Programming, Budgeting, and
    15·1 answer
  • Deer Lake Inc. uses a job order costing system with manufacturing overhead applied to products at a rate of 150% of direct labor
    9·1 answer
  • For product W, a firm has an annual holding cost percentage of 20%, an ordering cost of $110 per order, and annual demand of 15,
    14·1 answer
  • A benchmark market value index is comprised of three stocks. Yesterday the three stocks were priced at $30, $38, and $90. The nu
    13·1 answer
  • Describe a "rite of initiation" that you experienced at a place of work. This could be described via a situation in which you be
    10·1 answer
  • One of Justin's largest international customers is Alpine Airwaves in Switzerland. He got a call from his contact at Alpine Airw
    7·1 answer
  • Mike and Karen were divorced. Their only marital property was a personal residence with a fair market value of $1.5 million and
    13·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!