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A portfolio manager summarizes the input from the macro and micro forecasters in the following table: Micro Forecasts Expected Residual Standard Return (%) Beta Deviation (%) Asset Stock A 24 1.5 57 Stock B 21 1.9 Stock C 18 0.8 Stock D 15 1.2 6625 59 55 Asset T-bills Macro Forecasts Expected Return (%) 9 17 Standard Deviation (%) 0 28 Passive equity portfolio Calculate the following for a portfolio manager who is not allowed to short sell securities. If allowed to short sell securities, the manager's Sharpe ratio is 0.3048. a. What is the cost of the restriction in terms of Sharpe's measure? (Do not round intermediate calculations. Enter your answer as decimals rounded to 4 places.) Cost of restriction

A portfolio manager summarizes the input from the macro and micro forecasters in the following table: Micro Forecasts Expected Residual Standard Return (%) Beta Deviation (%) Asset Stock A 24 1.5 57 Stock B 21 1.9 Stock C 18 0.8 Stock D 15 1.2 6625 59 55 Asset T-bills Macro Forecasts Expected Return (%) 9 17 Standard Deviation (%) 0 28 Passive equity portfolio Calculate the following for a portfolio manager who is not allowed to short sell securities. If allowed to short sell securities, the manager's Sharpe ratio is 0.3048. a. What is the cost of the restriction in terms of Sharpe's measure? (Do not round intermediate calculations. Enter your answer as decimals rounded to 4 places.) Cost of restriction

Corporate Fin Focused Approach
Corporate Fin Focused Approach
5th Edition
ISBN:9781285660516
Author:EHRHARDT
Publisher:EHRHARDT
Chapter6: Risk And Return
Section: Chapter Questions
Problem 1Q
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A portfolio manager summarizes the input from the macro and micro forecasters in the following table: Micro Forecasts Expected Residual Standard Return (%) Beta Deviation (%) Asset Stock A 24 1.5 57 Stock B 21 1.9 Stock C 18 0.8 Stock D 15 1.2 6625 59 55 Asset T-bills Macro Forecasts Expected Return (%) 9 17 Standard Deviation (%) 0 28 Passive equity portfolio Calculate the following for a portfolio manager who is not allowed to short sell securities. If allowed to short sell securities, the manager's Sharpe ratio is 0.3048. a. What is the cost of the restriction in terms of Sharpe's measure? (Do not round intermediate calculations. Enter your answer as decimals rounded to 4 places.) Cost of restriction
Transcribed Image Text:A portfolio manager summarizes the input from the macro and micro forecasters in the following table: Micro Forecasts Expected Residual Standard Return (%) Beta Deviation (%) Asset Stock A 24 1.5 57 Stock B 21 1.9 Stock C 18 0.8 Stock D 15 1.2 6625 59 55 Asset T-bills Macro Forecasts Expected Return (%) 9 17 Standard Deviation (%) 0 28 Passive equity portfolio Calculate the following for a portfolio manager who is not allowed to short sell securities. If allowed to short sell securities, the manager's Sharpe ratio is 0.3048. a. What is the cost of the restriction in terms of Sharpe's measure? (Do not round intermediate calculations. Enter your answer as decimals rounded to 4 places.) Cost of restriction
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