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Question
The risk premium for exposure to aluminum commodity prices is 4%, and the firm has a beta relative to aluminum commodity prices of .6. The risk premium for exposure to GDP changes is 6%, and the firm has a beta relative to GDP of 1.2. If the risk-free rate is 4%, what is the expected return on this stock?
A. 10%
B. 11.5%
C. 13.6%
D. 14%
Answer
This answer is hidden. It contains 33 characters.
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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Q:
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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
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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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C. risk premium
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Q:
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Q:
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B. real; nominal
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Q:
Major functions of the investment committee include all but which one of the following?
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Q:
The asset universe is the _____________________.
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Q:
An investor is looking at different retirement investment choices, and he is willing to accept one with upside potential even if that means sacrificing certainty. Which of the following will he most likely select?
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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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B. high-income workers
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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Q:
A decrease of 1% in both your tax exemption and your income tax rate would, on net, _______________.
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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.
When you hedge your stock portfolio with futures contracts, the value of your portfolio beta is __________.
A. 0
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D. The answer cannot be determined from the information given.