投资学第10版课后习题答案docx.docx

投资学第10版课后习题答案docx.docx

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投资学第10版课后习题答案docx

CHAPTER4:

MUTUALFUNDSANDOTHERINVESTMENTCOMPANIES

PROBLEMSETS

1.Theunitinvestmenttrustshouldhaveloweroperatingexpenses.Becausetheinvestmenttrustportfolioisfixedoncethetrustisestablished,itdoesnothavetopayportfoliomanagerstoconstantlymonitorandrebalancetheportfolioasperceivedneedsoropportunitieschange.Becausetheportfolioisfixed,theunitinvestmenttrustalsoincursvirtuallynotradingcosts.

2.a.Unitinvestmenttrusts:

Diversificationfromlarge-scaleinvesting,lowertransactioncostsassociatedwithlarge-scaletrading,lowmanagementfees,predictableportfoliocomposition,guaranteedlowportfolioturnoverrate.

b.Open-endmutualfunds:

Diversificationfromlarge-scaleinvesting,lowertransactioncostsassociatedwithlarge-scaletrading,professionalmanagementthatmaybeabletotakeadvantageofbuyorsellopportunitiesastheyarise,recordkeeping.

c.

Individualstocksandbonds

:

Nomanagementfee;abilityto

coordinaterealizationofcapitalgainsorlosseswith

investors’personaltaxsituation

s;capabilityofdesigning

portfoliotoinvestor

’sspecificrisk

andreturnprofile.

3.Open-endfundsareobligatedtoredeeminvestor'ssharesatnetassetvalueandthusmustkeepcashorcash-equivalentsecuritiesonhandinordertomeetpotentialredemptions.Closed-endfundsdonotneedthecashreservesbecausetherearenoredemptionsforclosed-endfunds.Investorsinclosed-endfundsselltheirshareswhentheywishtocashout.

4.Balancedfundskeeprelativelystableproportionsoffundsinvestedineachassetclass.Theyaremeantasconvenientinstrumentstoprovideparticipationinarangeofassetclasses.Life-cyclefunds

arebalancedfundswhoseassetmixgenerallydependsontheageoftheinvestor.Aggressivelife-cyclefunds,withlargerinvestments

inequities,aremarketedtoyoungerinvestors,whileconservativelife-cyclefunds,withlargerinvestmentsinfixed-incomesecurities,aredesignedforolderinvestors.Assetallocationfunds,incontrast,mayvarytheproportionsinvestedineachassetclassbylargeamountsaspredictionsofrelativeperformanceacrossclassesvary.Assetallocationfundsthereforeengageinmoreaggressivemarkettiming.

5.Unlikeanopen-endfund,inwhichunderlyingsharesareredeemedwhenthefundisredeemed,aclosed-endfundtradesasasecurityinthemarket.Thus,theirpricesmaydifferfromtheNAV.

6.AdvantagesofanETFoveramutualfund:

ETFsarecontinuouslytradedandcanbesoldorpurchasedonmargin.

TherearenocapitalgainstaxtriggerswhenanETFissold（sharesarejustsoldfromoneinvestortoanother）.

Investorsbuyfrombrokers,thuseliminatingthecostofdirectmarketingtoindividualsmallinvestors.Thisimplieslowermanagementfees.

DisadvantagesofanETFoveramutualfund:

PricescandepartfromNAV（unlikeanopen-endfund）.

Thereisabrokerfeewhenbuyingandselling（unlikeano-loadfund）.

7.Theofferingpriceincludesa6%front-endload,orsalescommission,meaningthateverydollarpaidresultsinonly$goingtowardpurchaseofshares.Therefore:

Offeringprice=

NAV

$10.70=$

1

Load

10.06

8.NAV=Offeringprice（1–Load）=$.95=$

9.StockValueHeldbyFund

A$7,000,000

B12,000,000

C8,000,000

D15,000,000Total$42,000,000

Netassetvalue=

$42,000,000

$30,000=$

4,000,000

10.Valueofstockssoldandreplaced=$15,000,000

Turnoverrate=$15,000,000=,or%

$42,000,000

11.a.

$200,000,000

$3,000,000

NAV

$39.40

5,000,000

b.

Premium（ordiscount）=

PriceNAV=

$36

$39.40=–,or%

NAV

$39.40

Thefundsellsatan%discountfromNAV.

NAV1NAV0Distributions

$12.10

$12.50

$1.50

12.

$12.50

0.088,or8.8%

NAV0

13.a.Start-of-yearprice:

P0=$

×=$

End-of-yearprice:

P=$×=$

1

AlthoughNAVincreasedby$,thepriceofthefunddecreasedby

$.

Rateofreturn=

P

PDistributions

$11.25

$12.24

$1.50

1

0

0.042,or4.2%

P0

$12.24

b.AninvestorholdingthesamesecuritiesasthefundmanagerwouldhaveearnedarateofreturnbasedontheincreaseintheNAVoftheportfolio:

NAV1NAV0Distributions

$12.10

$12.00

$1.50

NAV0

$12.00

0.133,or13.3%

14.a.Empiricalresearchindicatesthatpastperformanceofmutualfundsisnothighlypredictiveoffutureperformance,

especiallyforbetter-performingfunds.Whiletheremaybesome

tendencyforthefundtobeanaboveaverageperformernextyear,itisunlikelytoonceagainbeatop10%performer.

b.Ontheotherhand,theevidenceismoresuggestiveofatendencyforpoorperformancetopersist.Thistendencyisprobablyrelatedtofundcostsandturnoverrates.Thusifthefundisamongthepoorestperformers,investorsshouldbeconcernedthatthepoorperformancewillpersist.

15.NAV0=$200,000,000/10,000,000=$20

Dividendspershare=$2,000,000/10,000,000=$

NAVisbasedonthe8%pricegain,lessthe1%12b-1fee:

1

NAV1=$20

（1–=$

Rateofreturn=

$21.384$20

$0.20=,or%

$20

16.Theexcessofpurchasesoversalesmustbeduetonewinflowsintothefund.Therefore,$400millionofstockpreviouslyheldbythefundwasreplacedbynewholdings.Soturnoveris:

$400/$2,200=,or%.

17.Feespaidtoinvestmentmanagerswere:

$billion=$millionSincethetotalexpenseratiowas%andthemanagementfeewas%,weconcludethat%mustbeforotherexpenses.Therefore,other

administrativeexpenseswere:

$billion=$million.

18.Asaninitialapproximation,yourreturnequalsthereturnonthesharesminusthetotaloftheexpenseratioandpurchasecosts:

12%

%4%=%.

Buttheprecisereturnislessthanthisbecausethe4%loadispaidupfront,notattheendoftheyear.

Topurchasetheshares,youwouldhavehadtoinvest:

$20,000/（1=$20,833.

Thesharesincreaseinvaluefrom$20,000to:

$20,000$22,160.

=

Therateofreturnis:

（$22,160

$20,833）/$20,833=%.

19.

Assume$1,000investment

Loaded-UpFund

EconomyFund

Yearlygrowth（ris6%）

（1r.01.0075）

（.98）（1r.0025）

t

=1year

$1,

$1,

t

=3years

$1,

$1,

t

=10years

$1,

$1,

20.a.$450,000,000$10,000000$1044,000,000

b.Theredemptionof1millionshareswillmostlikelytriggercapitalgainstaxeswhichwilllowertheremainingportfoliobyanamountgreaterthan$10,000,000（implyingaremainingtotalvaluelessthan$440,000,000）.Theoutstandingsharesfallto43millionandtheNAVdropstobelow$10.

21.Supposeyouhave$1,000toinvest.TheinitialinvestmentinClassAsharesis$940netofthefront-endload.Afterfouryears,yourportfoliowillbeworth:

$9404=$1,

ClassBsharesallowyoutoinvestthefull$1,000,butyourinvestmentperformancenetof12b-1feeswillbeonly%,andyouwillpaya1%back-endloadfeeifyousellafterfouryears.Yourportfoliovalueafterfouryearswillbe:

$1,0004=$1,

Afterpayingtheback-endloadfee,yourportfoliovaluewillbe:

$1,.99=$1,

ClassBsharesarethebetterchoiceifyourhorizonisfouryears.

Witha15-yearhorizon,theClassAshareswillbeworth:

$94015=$3,

FortheClassBshares,thereisnoback-endloadinthiscasesincethehorizonisgreaterthanfiveyears.Therefore,thevalueoftheClassBshareswillbe:

$1,00015=$3,

Atthislongerhorizon,ClassBsharesarenolongerthebetterchoice.TheeffectofClassB's%12b-1feesaccumulatesovertimeandfinallyoverwhelmsthe6%loadchargedtoClassAinvestors.

22.a.

Aftertwoyears,eachdollarinvestedinafundwitha4%loadandaportfolioreturnequaltorwillgrowto:

$2.

（1+

r–

EachdollarinvestedinthebankCDwillgrowto:

$1

.

Ifthemutualfundistobethebetterinvestment,thentheportfolioreturn（r）mustsatisfy:

（1+

r–

2

>

（1+

r–

2>

（1+r–2>

1+r–>

1+r>

Therefore:

r>=%

b.Ifyouinvestforsixyears,thentheportfolioreturnmustsatisfy:

（1+r–6>=

（1+

r

–6>

1+

r

–>

r>%

Thecutoffrateofreturnislowerforthesix-yearinvestmentbecausethe“fixedcost”（theone-timefront-endload）isspreadoveragreaternumberofyears.

c.Witha12b-1feeinsteadofafront-endload,theportfolio

mustearnarateofreturn（r）thatsatisfies:

1+r––>

Inthiscase,rmustexceed%regardlessoftheinvestment

horizon.

23.Theturnoverrateis50%.Thismeansthat,onaverage,50%ofthe

portfolioissoldandreplacedwithothersecuritieseachyear.

Tradingcostsonthesellordersare%andthebuyordersto

replacethosesecuritiesentailanother%intradingcosts.Total

tradingcostswillreduceportfolioreturnsby:

2%=%

24.Forthebondfund,thefractionofportfolioincomegivenuptofeesis:

0.6%

4.0%

=,or%

Fortheequityfund,thefractionofinvestmentearningsgivenuptofeesis:

1.6%=,or%

12.0%

Feesareamuchhigherfractionofexpectedearningsforthebondfundandthereforemaybeamoreimportantfactorinselectingthebondfund.

Thismayhelptoexplainwhyunmanagedunitinvestmenttrustsareconcentratedinthefixedincomemarket.Theadvantagesofunitinvestmenttrustsarelowturnover,lowtradingcosts,andlowmanagementfees.Thisisamoreimportantconcerntobond-marketinvestors.

25.Supposethatfinishinginthetophalfofallportfoliomanagersispurelyluck,andthattheprobabilityofdoingsoinanyyearis

exactly?

.Thentheprobabilitythatanyparticularma