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
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
$125,000,000 ? ? ? ?
12% -3% 18% 20% 8%
a.)estimate the end of the year assets figures missing from
b.)Estimate the hedge fund investor’s annualized rate of return
over this period.
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
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
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