EBK INVESTMENTS
11th Edition
ISBN: 9781259357480
Author: Bodie
Publisher: MCGRAW HILL BOOK COMPANY
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Chapter 4, Problem 23PS
Summary Introduction
Adequate information:
The bid ask spread pertaining to the value of trade accounts for 0.4%. the turnover rate of the portfolio accounts for 50%.
To calculate:
The Portfolio's total return decreased by the cost of trading
Introduction:
The turnover ratio of the fund refers to the measurement that reflects the percentage associated with the holding of specific fund, which have been turned over or replaced during the past year.
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Students have asked these similar questions
What is required return using the capital asset pricing model if a stock's beta is 1.2 and the individual, who expects the market to rise by 11.2%, can earn 4.4% invested in a risk-free Treasury Bill?
Suppose that every time a fund manager trades stock, transaction costs such as commissions and bid–ask spreads amount to .4% of the value of the trade. If the portfolio turnover rate is 50%, by how much is the total return of the portfolio reduced by trading costs?
Suppose that every time a fund manager trades stock, transaction costs such as commissions and bid-ask spreads amount to 0.5% of
the value of the trade.
If the portfolio turnover rate is 55%, by how much is the total return of the portfolio reduced by trading costs? (Round your answer to 2
decimal places.)
Reduction in portfolio returns
%
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