a. A mutual fund is a professionally managed type of collective investment scheme that pools money from many investors and invests in stocks, bonds, short-tem money market instruments and other securities. The perfomance of these mutual funds and the portfolio they build needs to be evaluated as frequently as possible. Evaluating the performance of these mutual funds is important for both existing and potential investors. The Table below provides the average retum, standard deviation and betas of selected equity mutual funds over a period of three years. The average risk free rate for the period is estimated at 15%. Standard Deviation Portfolio Portfolio A Portfolio B Portfolio C Average return Beta 27.62 16 1.2 20.12 15 0.9 26.25 12 1.05 GSE retum (benchmark) Required: Estimate and compare the performance of the funds with the market using: 16.18 10 1.0 i. Treynor's measure ii. Sharpe's measure iii. Jensen's Measure b. The issuing of security goes through a number of processes. Once the SEC has commented on the registration statement and a preliminary prospectus has been distributed to interested investors, the investment bankers organize road shows and undertake book building in the process. Required: Explain the meaning and two (2) purposes of road shows as used in the preamble above. c. You are considering a bond with a coupon rate of 10% per annum. Coupons are paid semiannually. The bond has a face value of ¢ 1000 and matures in 5 years. The yield to maturity is 11%. What is the value of the bond? Indicated whether the bond is trading at a premium, discount, or at par
a. A mutual fund is a professionally managed type of collective investment scheme that pools money from many investors and invests in stocks, bonds, short-tem money market instruments and other securities. The perfomance of these mutual funds and the portfolio they build needs to be evaluated as frequently as possible. Evaluating the performance of these mutual funds is important for both existing and potential investors. The Table below provides the average retum, standard deviation and betas of selected equity mutual funds over a period of three years. The average risk free rate for the period is estimated at 15%. Standard Deviation Portfolio Portfolio A Portfolio B Portfolio C Average return Beta 27.62 16 1.2 20.12 15 0.9 26.25 12 1.05 GSE retum (benchmark) Required: Estimate and compare the performance of the funds with the market using: 16.18 10 1.0 i. Treynor's measure ii. Sharpe's measure iii. Jensen's Measure b. The issuing of security goes through a number of processes. Once the SEC has commented on the registration statement and a preliminary prospectus has been distributed to interested investors, the investment bankers organize road shows and undertake book building in the process. Required: Explain the meaning and two (2) purposes of road shows as used in the preamble above. c. You are considering a bond with a coupon rate of 10% per annum. Coupons are paid semiannually. The bond has a face value of ¢ 1000 and matures in 5 years. The yield to maturity is 11%. What is the value of the bond? Indicated whether the bond is trading at a premium, discount, or at par
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
Related questions
Question
Transcribed Image Text:a. A mutual fund is a professionally managed type of collective investment scheme that
pools money from many investors and invests in stocks, bonds, short-tem money
market instruments and other securities. The perfomance of these mutual funds and
the portfolio they build needs to be evaluated as frequently as possible. Evaluating the
performance of these mutual funds is important for both existing and potential
investors. The Table below provides the average retum, standard deviation and betas
of selected equity mutual funds over a period of three years. The average risk free rate
for the period is estimated at 15%.
Standard Deviation
Portfolio
Portfolio A
Portfolio B
Portfolio C
Average return
Beta
27.62
16
1.2
20.12
15
0.9
26.25
12
1.05
GSE retum
(benchmark)
Required:
Estimate and compare the performance of the funds with the market using:
16.18
10
1.0
i. Treynor's measure
ii. Sharpe's measure
iii. Jensen's Measure
b. The issuing of security goes through a number of processes. Once the SEC has
commented on the registration statement and a preliminary prospectus has been
distributed to interested investors, the investment bankers organize road shows and
undertake book building in the process.
Required: Explain the meaning and two (2) purposes of road shows as used in the
preamble above.
c. You are considering a bond with a coupon rate of 10% per annum. Coupons are paid
semiannually. The bond has a face value of ¢ 1000 and matures in 5 years. The yield
to maturity is 11%. What is the value of the bond? Indicated whether the bond is
trading at a premium, discount, or at par
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education