A pensioner is expecting a lump sum of GHC 200,000 when she goes on pension next year and is thinking of the best way to allocate the funds to be received. An investment analyst has introduced her to a four funds as follows: Gamma Fund: This specializes in money market instruments and bonds of large corporations Delta Fund: This specializes in equities of exchange listed financial institutions Beta Fund: This specializes in bonds and equities of all good performing companies Index Fund: This is a portfolio that mimics the Ghana Stock Exchange All Share Index The investment analyst gathered information about the performance of the four funds and this is presented below: Funds Mean Return Standard Deviation Beta Co-efficient Gamma 15% 8% 0.25 Delta 20% 14% 1.20 Beta 18% 14% 0.85 Index 17% 12% 1.00 The rate on Government of Ghana five-year bond which is used as the standard risk-free rate is 8% per annum. The pensioner is looking for the best way to allocate the lumpsum when it is received. She intends allocating the money based on the performance of the funds as indicated by the standard methods for measuring mutual funds’ performance in the manner indicated below: Performance 1st 2nd 3rd 4th Planned Allocation 40% 30% 20% 10% You are required to assess the performances of the four mutual funds above using the following Sharpe Performance Index Treynor Performance Index Jensen Performance Index For each fund indicate how the pensioner should allocate the lump sum based on performance of the fund.
A pensioner is expecting a lump sum of GHC 200,000 when she goes on pension next year and is thinking of the best way to allocate the funds to be received. An investment analyst has introduced her to a four funds as follows: Gamma Fund: This specializes in money market instruments and bonds of large corporations Delta Fund: This specializes in equities of exchange listed financial institutions Beta Fund: This specializes in bonds and equities of all good performing companies Index Fund: This is a portfolio that mimics the Ghana Stock Exchange All Share Index The investment analyst gathered information about the performance of the four funds and this is presented below: Funds Mean Return Standard Deviation Beta Co-efficient Gamma 15% 8% 0.25 Delta 20% 14% 1.20 Beta 18% 14% 0.85 Index 17% 12% 1.00 The rate on Government of Ghana five-year bond which is used as the standard risk-free rate is 8% per annum. The pensioner is looking for the best way to allocate the lumpsum when it is received. She intends allocating the money based on the performance of the funds as indicated by the standard methods for measuring mutual funds’ performance in the manner indicated below: Performance 1st 2nd 3rd 4th Planned Allocation 40% 30% 20% 10% You are required to assess the performances of the four mutual funds above using the following Sharpe Performance Index Treynor Performance Index Jensen Performance Index For each fund indicate how the pensioner should allocate the lump sum based on performance of the fund.
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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A pensioner is expecting a lump sum of GHC 200,000 when she goes on pension next year and is thinking of the best way to allocate the funds to be received. An investment analyst has introduced her to a four funds as follows:
- Gamma Fund: This specializes in
money market instruments and bonds of large corporations - Delta Fund: This specializes in equities of exchange listed financial institutions
- Beta Fund: This specializes in bonds and equities of all good performing companies
- Index Fund: This is a portfolio that mimics the Ghana Stock Exchange All Share Index
The investment analyst gathered information about the performance of the four funds and this is presented below:
|
Funds |
Mean Return |
Standard Deviation |
Beta Co-efficient |
|
|
|
|
|
|
Gamma |
15% |
8% |
0.25 |
|
Delta |
20% |
14% |
1.20 |
|
Beta |
18% |
14% |
0.85 |
|
Index |
17% |
12% |
1.00 |
The rate on Government of Ghana five-year bond which is used as the standard risk-free rate is 8% per annum. The pensioner is looking for the best way to allocate the lumpsum when it is received. She intends allocating the money based on the performance of the funds as indicated by the standard methods for measuring mutual funds’ performance in the manner indicated below:
|
Performance |
1st |
2nd |
3rd |
4th |
|
Planned Allocation |
40% |
30% |
20% |
10% |
You are required to assess the performances of the four mutual funds above using the following
- Sharpe Performance Index
- Treynor Performance Index
- Jensen Performance Index
For each fund indicate how the pensioner should allocate the lump sum based on performance of the fund.
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