Business, 03.12.2019 17:31 msab4821

James fromholtz is considering whether to invest in a newly formed investment fund. the fund’s investment objective is to acquire home mortgage securities at what it hopes will be bargain prices. the fund sponsor has suggested to james that the fund’s performance will hinge on how the national economy performs in the coming years. specifically, he suggested the following possible outcomes; james has estimated the expected rate of return from this investment is 20.75%. james wants to apply his recently acquired understanding of the security market line concept to his analysis.

state of economy probability fund returns
rapid expansion & recovery 10% 100%
modest growth 35% 40%
continued recession 45% 15%
falls into depression 10% -100

(a) if the risk-free rate of interest is currently 2.2 percent and the beta for the investment is 3.2, what is the slope of the security market line for the real estate mortgage security investment?
(b) james is also considering the investment of his money in a market index fund that has an expected rate of return of 9 percent. what is the slope of the security market line (i. e., the reward-to-risk ratio) for this investment opportunity?
(c) based on your analysis of parts a and b above, which investment should james take? why?

Answers: 3

Show answers

Another question on Business

Business, 21.06.2019 20:00

Jorge is a manager at starbucks. his operational plan includes achieving annual sales of $4,000,000 for his store. with only one month left to end of the fiscal year, jorge realizes that he won't reach his annual sales goal. what are his options?

Answers: 2

Answer

Business, 22.06.2019 04:50

Steffi is reviewing various licenses and their uses. match the licenses to their respective uses. you are eligible to work within the state. you are eligible to sell limited investment securities. you are eligible to sell fixed income investment products. your compensation is fee based. section 6 section 7 section 63 section 65

Answers: 3

Answer

Business, 22.06.2019 22:00

Brody corp. uses a process costing system in which direct materials are added at the beginning of the process and conversion costs are incurred uniformly throughout the process. beginning inventory for january consisted of 1,050 units that were 65% completed. 10,900 units were started into the process during january. on january 31, the inventory consisted of 500 units that were 50% completed. what would be the equivalent units for direct materials cost using the weighted average method?

Answers: 2

Answer

Business, 23.06.2019 07:00

Which (if any) of the following scenarios is the result of a natural monopoly? instructions: you may select more than one answer. a. patent holders of genetically modified seeds are permitted to sue farmers who save seeds from one planting season to the next. b. doctors in the united states are prohibited from practicing without a medical license. c. there is one train operator with service from baltimore to philadelphia. d. coal is used as the primary energy in a country with abundant coal deposits.

Answers: 1

Answer

You know the right answer?

James fromholtz is considering whether to invest in a newly formed investment fund. the fund’s inves...

Questions