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Question
Portfolio A has a beta of 1.3 and an expected return of 21%. Portfolio B has a beta of .7 and an expected return of 17%. The risk-free rate of return is 9%. If a hedge fund manager wants to take advantage of an arbitrage opportunity, she 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
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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
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Q:
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A. investing in the stock of companies that are price takers
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Q:
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B. $37,500
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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:
The asset universe is the _____________________.
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Q:
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Q:
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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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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.