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CHAPTER 14 1.) If a private equity investment loses an average of 15 percent for each of its first three years, what average annual return must it achieve over the next ten years in order to provide its owners a 20 percent annual return over the thirteen-year period? 2.) Suppose a hedge fund provides that the management fees are 1 percent of the total assets plus 20 percent of the profits annually. The gross returns of the fund are shown below. 2008 2009 2010 2011 2012 End of year assets $125,000,000 ? ? ? ? Gross income 12% -3% 18% 20% 8% a.)estimate the end of the year assets figures missing from table? b.)Estimate the hedge fund investor’s annualized rate of return over this period. Chapter 15 3.)Consider the information in the following table: Stock Beta Value 1,000 JUI 1.07 $ 11,750 500 LLO 0.92 9,500 2,300HI 1.10 12,000 1,200 NMB 1.22 17,875 500 ERW 1.10 8,875 1,700 OP 0.88 10,625 900 XXC 1.00 12,455 1,200 PPM 1.03 13,800 2,500 PPU 1.22 9,500 1,500 WQE 1.14 11,000 Total: $117,380 a.)what is the beta of this portfolio? b.)What (specifically) would you do to bring this portfolio back to a target beta of 1.10? 4.)A portfolio consists of $ 250,000 in stock and $ 10,000 in cash. The beta of the portfolio is 1.10.Show how the beta of the portfolio can be reduced to 0.95 by shifting the equity/cash proportions?

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