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Homework answers / question archive / 1)Loaded-Up Fund charges a 126-1 fee of 100% and maintains an expense ratio of 0

1)Loaded-Up Fund charges a 126-1 fee of 100% and maintains an expense ratio of 0

Finance

1)Loaded-Up Fund charges a 126-1 fee of 100% and maintains an expense ratio of 0.75%. Economy Fund charges a front-end load of 2.0%, but has no 126-1 fee and an expense ratio of 0.25%. Assume the rate of return on both funds' portfolios (before any fees) is 8% per year. How much will an investment of $1,000 in each fund grow to after: (Round your answers to 2 decimal places.) Answer is not complete. Loaded-Up Economy Fund $ 1,062.50 Fund b. 1 year 3 years 10 years C.

2)A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term bond fund, and the third is a money market fund that provides a safe return of 8%. The characteristics of the risky funds are as follows: Expected Return Standard deviation Stock fund (S) 35% Bond fund (8) 12 15 16% The correlation between the fund returns is 0.13. a-1. What are the investment proportions in the minimum-variance portfolio of the two risky funds? (Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places.) Answer is complete but not entirely correct. Portfolio invested in the stock Portfolio invested in the bond 0.1848 0.8152 % 3
a-2. What are the expected value and standard deviation of its rate of return? (Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places.) Answer is complete but not entirely correct. Rate of Return Expected return 0.1274 Standard deviation 0.1456

3)

a. Describe the relationship between the interest rates on bonds of different maturities.

b. If we follow the Expectation Hypothesis, calculate the interest rate on a 3-year bond if

a 1-year bond has an interest rate of 2% and is expected to have an interest rate of 3% next year, and 5% in two years.

c. How does the Liquidity Premium Theory explain an upward-sloping yield curve during normal economic environment?

d. Explain the economic implications of an inverted yield curve.

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