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%. Portfolio Average return Standard Deviation Beta Portfolio A 27.62 16 1.2 Portfolio B 20.12 15 0.9 Portfolio C 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 Jensen's Measure iii.
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%. Portfolio Average return Standard Deviation Beta Portfolio A 27.62 16 1.2 Portfolio B 20.12 15 0.9 Portfolio C 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 Jensen's Measure iii.
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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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%.
Portfolio
Average return
Standard Deviation
Beta
Portfolio A
27.62
16
1.2
Portfolio B
20.12
15
0.9
Portfolio C
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
Jensen's Measure
iii.
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