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Question
Portfolio A has a beta of .2 and an expected return of 14%. Portfolio B has a beta of .5 and an expected return of 16%. The risk-free rate of return is 10%. If you manage a long-short equity fund and want to take advantage of an arbitrage opportunity, you should take a short position in portfolio ______ and a long position in portfolio __________.
A. A; A
B. A; B
C. B; A
D. B; B
Answer
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Related questions
Q:
Which of the following does not approximate the performance of a buy-and-hold portfolio strategy?
A. An equally weighted index
B. A price-weighted index
C. A value-weighted index
D. All of these options (Weights are not a factor in this situation.)
Q:
Under a "passive core" portfolio management strategy, a manager would ___________.
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B. index part of the portfolio and actively manage the rest
C. delegate the management of core segments of the portfolio to other managers
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Q:
An active asset allocation strategy involves _________.
A. investing in the stock of companies that are price takers
B. maintaining approximately the same proportions of a portfolio in each asset class over time
C. varying the proportions of a portfolio in each asset class in response to changing market conditions
D. selecting individual securities in different sectors that are believed to be undervalued
Q:
An employee has an average wage of $60,000 and has worked for the firm for 25 years. The defined benefit pension plan pays retirees 2.5% of the average wage times the years of service. The employee can expect to receive _______ per year upon retirement.
A. $18,000
B. $37,500
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D. $55,250
Q:
For a bank, the difference between the interest rate charged to borrowers and the interest rate paid on liabilities is called the __________.
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Q:
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Q:
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Q:
The asset universe is the _____________________.
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Q:
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Q:
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What is the amount of the total contribution to his 403b if John contributes 5% of his own money?
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Q:
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Q:
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Q:
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Q:
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C. younger workers
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Q:
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Q:
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Q:
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A. traditional retirement plan
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C. 401k plan
D. 403b plan
Q:
A decrease of 1% in both your tax exemption and your income tax rate would, on net, _______________.
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B. make you worse off
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Q:
A typical hedge fund incentive bonus is usually equal to ________ of investment profits beyond a predetermined benchmark index.
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Q:
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Q:
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Q:
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Q:
You manage a $15 million hedge fund portfolio with beta = 1.2 and alpha = 2% per quarter. Assume the risk-free rate is 2% per quarter and the current value of the S&P 500 Index is 1,200. You want to exploit the positive alpha, but you are afraid that the stock market may fall and you want to hedge your portfolio by selling 3-month S&P 500 future contracts. The S&P contract multiplier is $250.
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A. 0
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D. The answer cannot be determined from the information given.