4. Consider the following information regarding the performance of a money manager in a recent month.The table represents the actual return of each sector of the manager's portfolio in column 1, the fractionof the portfolio allocated to each sector in column 2, the benchmark or neutral sector allocations incolumn 3, and the returns of sector indices in column 4 (9 Marks):ActualReturnActualWeightBenchmarkWeightIndex ReturnEquity 2.2% 0.50.52.7% (S&P 500)Bonds 10.20.21.2 (Barclay's Aggregate)Cash0.60.30.30.7a) What was the manager's return in the month? (2 Marks)b) What was her overperformance or underperformance? (1 Mark)What was the contribution of security selection to relative performance? (3 Marks)d) What was the contribution of asset allocation to relative performance? (3 Marks)

Step 1: a)The manager's return in the month = ∑(Actual return * Actual weight) = ( 0.022 * 0.5) +…

Answered: 4. Consider the following information…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Data are given as follows: (all the values are in percent) Month Average portfolio return market Average Average risk-free return rate 2.464 3.360 0.090 16.130 2.348 0.090 0.771 -1.484 0.120 -6.386 -2.437 0.120 15 -2.861 1.965 0.090 16 -7.673 2.806 0.120 0.805 -5.721 0.150 -0.372 0.327 0.150 1.508 2.464 0.150 10 2.003 2.250 0.150 11 -4.723 6.639 0.210 12 Calculate Treynor measure, Sharpe ratio, tracking error, information ratio, and hit ratio. Then, evaluate the performance of this portfolio. 2.383 4.874 0.210
Use the following output from a market model regression of the weekly percentage returns on the AIG commodities index on a market index to answer questions a. - f. a. What is the formula for the Commodities Index' characteristic line? b. You forecast a market return of 1.0% for next week. What is next week's expected return for the commodities index? c. What is the correlation between the return on the commodities index and the return on the market Index? d. How much of the variation in the commodities index's returns are explained by the model? e. Based on these regression results, the commodities index would be considered what kind of an investment? f. Does this regression have much explanatory power? Why or why not?
5- Which of the following statements about "Cash From Operations/Interest Payments" ratio is correct? a) If it is 40% or less, it is safe, an decrease in the trend analysis is a positive indicator. b) 1 and above is safe, an decrease in trend analysis is a positive indicator 3 and above is safe, an increase in trend analysis is a positive indicator d) 2 and below is safe, an increase in trend analysis is a positive indicator
questions to be answered
Based on the following information, what is the standard deviation of returns? Probability of State of Economy Rate of Return if State of Economy State Occurs Recession .24 -.092 Normal .45 .107 Boom .31 .217
The expected market return and risk for different assumptions about the state of the economy is shown below. State of Economy Probability of State Expected Market Return Fast growth 0.11 35% Slow growth 0.50 16% No growth 0.20 5% Recession 0.15 -22% Depression 0.04 -32% Compute the expected return and standard deviation. Note: Round your answers to 2 decimal places. Compute the expected return and risk for the following 2 scenarios: Note: Round your answers to 2 decimal places. Scenario 1: State of Economy Probability of State Expected Market Return Fast growth 0.09 38% Slow growth 0.33 16% No growth 0.36 2% Recession 0.19-18% Depression 0.03 -32% Scenario 2: State of Economy Probability of State Expected Market Return Fast growth 0.16 40% Slow growth 0.31 13% No growth 0.38 2% Recession 0.12-17% Depression 0.03 -33%
) The following questions are based on the given information from table of probability distributions of returns on investment individual shares and portfolio below: Table 3: Probability distributions of returns on investment for individual shares and portfolio. State of Probability of the States Return on Share A Return on Share B (rB) Return on Portfolio AB (ran) Economy (ra) 0.20 0.20 0.20 0.20 0.20 15% -5% 5% 35% 25% -5% 15% 25% 5% 35% 5% 5% 15% 20% 30% -234
Consider the following information about the various states of economy and the returns of various investment alternatives for each scenario. Answer the questions that follow. % Return on T-Bills, Stocks and Market Index State of the Economy Probability T- Phillips Pay- Rubber- Market Bills up made Index Recession 0.2 7 -22 28 10 -13 Below Average 0.1 7 -2 14.7 -10 1 Average 0.3 7 20 0 7 15…
Consider the following information regarding the performance of a money manager in a recent month. The table represents the actual return of each sector of the manager's portfolio in column 1 , the fraction of the portfolio allocated to each sector in column 2 , the benchmark or neutral sector allocations in column 3 , and the returns of sector indices in column 4. \table[[,Actual,Benchmark],[Return,Actual Weight,Weight,Index Return,],[Equity,2.2%,0.4,0.5,2.7%
3. Price/earnings ratios are ____ for firms with ____ expected earnings and ____ expected required ratesof return.a. higher; higher; higherb. lower; lower; lowerc. higher; lower; higherd. higher; higher; lowere. higher; lower; lower
Exercice 5 ( Answer question 7 to 9) The expected return on treasury bills E(RF)= 4% Calculate the expected return E(.) for the market portfolio, the FGL security and the SDL Calculate the variance and standard deviation for the market portfolio, FGL security and SDL Calculate the covariance between the market portfolio and the FGL security, and the covariance between the market portfolio and the SDL Calculate the correlation coefficient between the market portfolio and the FGL security, and the correlation coefficient between the market portfolio and the SDL security. Calculate the beta of FGL stock relative to the market portfolio with two different methods. Calculate the beta of the SDL stock relative to the market portfolio with two different Calculate the expected return of the Pfl portfolio composed of 70% FGL stock and 30% SDL stock, what is the beta of this portfolio? Using CAPM assess the performance of FGL and SDL securities, Are they overvalued or undervalued? Which of…
Consider the following information about the various states of economy and the returns of various investment alternatives for each scenario. Answer the questions that follow. % Return on T-Bills, Stocks and Market Index States of Economy Probability T-Bills Phillips Pay-up Rubber-Made Market Index Recession 0.2 7 -22 28 10 -13 Below Average 0.1 7 -2 14.7 -10 1 Average 0.3 7 20 0 7 15 Above Average 0.3 7 35 -10 45 29 Boom 0.1 7 50 -20 30 43 Mean 7 16.9 20.7 19.6 15 Variance (%) ^2 0 549.09 244.124 358.04 313.6 Standard Deviation 0 23.4326695 15.6244712 18.92194493 17.7087549 Coefficient of Variation 0 1.386548491 7.54805372 0.965405354 1.18058366 Covariance wit MP 0 4.13 -275 231 313.60 Correlation with Market Index 0.9953 -0.9953 0.6894 1.0000 Beta 0 1.32…

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