题目
An investment advisor is analyzing the range of potential expected returns of a new fund designed to replicate the directional moves of the BSE Sensex Index but with twice the volatility of the index. The Sensex has an expected annual return of 12.3% and volatility of 19.0%, and the risk free rate is 2.5% per year. Assuming the correlation between the fund’s returns and that of the index is 1, what is the expected return of the fund using the capital asset pricing model?
选项
A.18.5%
B.19.0%
C.22.1%
D.24.6%
答案
C
解析
If the CAPM holds, then , which is maximized at the greatest possible beta value which implies a correlation of 1 between the fund’s return and the index return. Since the volatility of the fund is twice that of the index, a correlation of 1 implies a maximum beta βi of 2. Therefore: Ri (max) = 2.5% 2 * (12.3% - 2.5%) = 22.1%.如果CAPM成立，则，它将在最大可能的beta值处最大化，这意味着基金的回报率与指数回报率之间的相关性为1。 由于该基金的波动性是该指数的两倍，所以相关性为1意味着最大betaβi为2。因此：Ri（max）= 2.5％ 2 *（12.3％-2.5％）= 22.1％。