An analyst wants to evaluate Portfolio X consisting entirely of US common stocks, using both the Treynor and Sharpe measures of the portfolio performance. The following table provides the average annual rate of return for the portfolio X the market portfolio (as measured by the Standard & Poor's 500 index) and US Treasury billds (Tbills) during the past eight years                                                       Average Return Standard deviation Beta                           Portfolio X 10% 18% 0.6                           S & P 500 12% 13% 1                           T bills 6% n/a n/a                                                             a. Calculate both the Treynor measure and the Sharpe measure for both Portfolio X and the S&P 500. Briefly explain whether portfolio X underperformed, equalled, or outperformed the S&P 500 on a risk-adjusted basis using both the Treynor measure and the Sharpe measure.  b. Based on the performance of Portfolio X relative to the S&P 500 calculated in part a, briefly explain the reason for the conflicting results when using the Treynor measure versus the Sharpe measure.

Q: 2. An analyst wants to evaluate Portfolio X, consisting entirely of U.S. common stocks, using both…

A: Treynor ratio refers to the risk adjusted return based on the systematic risk or beta.Sharpe ratio…

Q: 1. Using the factor beta estimates and the monthly expected return estimates in the table shown…

A: A risk premium represents the anticipated investment return that an asset is expected to generate…

Q: owing return data for the market and for each of the investments over the past 10 0-2019 Year 2010…

A: Beta measures the risk of a stock with respect to the overall market. The beta for the overall…

Q: nsider historical data showing that the average annual rate of return on the S&P 500 portfolio over…

A: T-bill rate (Rf)2%Average return more than T-bills (Rf)8%Standard deviation of S&P 50028%Weight…

Q: Use the following scenario analysis for Stocks X and Y to answer the questions below (round to the…

A: 1)Calculation of expected rate of return:Formula used:

Q: Consider historical data showing that the average annual rate of return on the S&P 500 portfolio…

A: It is helpful in reflecting the average of how far away every value is from the expected return. It…

Q: An analyst wants to evaluate Portfolio X, consisting entirely of U.S. common stocks, using both the…

A: The Treynor measure (T) relates the rate of return earned above the risk‑free rate to the…

Q: bserve the mean, the standard deviation, and the CV of the annual rate of return of the portfolio.…

A: Mean is the average return earned over the given period. Standard deviation is a measure of risk.…

Q: Below are the annual returns of the stock A, B, C and D and the market portfolio for the period…

A: Expected return and Standard deviation can be computed as follows:

Q: Required: a. If your risk-aversion coefficient is A = 4.9 and you believe that the entire 1927-2021…

A: Risk and return are essential financial principles. The term “risk” refers to the uncertainty and…

Q: Construct a market weighted index using 3 stocks below over a one year period to find the index…

A: Assume the index at T0 is 100. Hence

Q: Consider historical data showing that the average annual rate of return on the S&P 500 portfolio…

A: Utility: It represents a measure of satisfaction for an investor derived from having different…

Q: Based on the following information, calculate the expected return and standard deviation for each of…

A: Honor code: Since you have asked multiple questions, we will solve the first question for you. If…

Q: assume that expected return of the stock A in Rachel's portfolio is 13.6% this year.The risk premium…

A:

Q: Consider historical data showing that the average annual rate of return on the S&P 500 portfolio…

A: S&P 500 return = 8% more than Treasury bill returnS&P Standard deviation (SD) = 34%Current…

Q: Assume that you are given the following partial covariance and correlation matrices for Securities…

A: Here,

Q: your risk-aversion coefficient is A = 3./ and you believe that the entire 1927-20 period is…

A: Two fundamental concepts in finance are risk and return. The dangers of loss and uncertainty…

Q: Consider historical data showing that the average annual rate of return on the S&P 500 portfolio…

A: Rate of S and P=2+8=10%Rate of treasury bill=2%Standard deviation of S and P=

Q: Below are the annual returns of the stock A, B, C and D and the market portfolio for the period…

A: “Hey, since there are multiple questions posted, we will answer first question. If you want any…

Q: Calculate the utility levels of each portfolio for an investor with A = 3. Assume the utility…

A: First let us list the formulas that we will be using to solve this question.  Return of index =…

Q: An analyst wants to evaluate Portfolio X, consisting entirely of U.S. common stocks, using both the…

A: Treynor ratio = (Average return - Risk free rate)/Beta Sharpe ratio = (Average return - Risk free…

Q: Assume that ASX 300 Index represents the risky portfolio. Calculate the annual return for the period…

A: Annual return is a return percentage of profit or loss occurring in one year of holding period to…

Q: onsider historical data showing that the average annual rate of return on the S&P 500 portfolio over…

A: Rate of treasury bill=3.0%Rate of S&P 500=3+8=11%Standard deviation of S & P=31%A=2

Q: Consider historical data showing that the average annual rate of return on the S&P 500 portfolio…

A: T-bill return = 6% The average market return is 8% more than the T-bill return. Therefore,Market…

Q: You are given the following partial covariance and correlation tables from historical data:…

A: Here, Covariance between Security K and Market is 0.0021600 Standard Deviation of Market is 4.3%

Q: Consider historical data showing that the average annual rate of return on the S&P 500 portfolio…

A: A utility function is a decision theory represents an individual's or entity's preferences and how…

Q: Consider the following historical performance data for two different portfolios, the Standard and…

A: Treasury Bills (T-bills) are short-term debt instruments issued by the U.S. Department of the…

Q: Consider historical data showing that the average annual rate of return on the S&P 500 portfolio…

A: T bill rate (rBill) = 4%It is given that the return on S&P index (rIndex) = 8% more than T bill…

Q: Consider historical data showing that the average annual rate of return on the S&P 500 portfolio…

A: When an investor engages in the investment of two or more assets rather than one single asset to…

Q: The table below provides five years of realized returns for both Stock XYZ and the market portfolio.…

A: Given: Year Particulars Stock XYZ Market return 1 Return 2% -6% 2 Return 17% 17% 3 Return…

Q: Stocks A and B have the following historical returns: Year Stock A's Returns 2015 (24.25%) 2016…

A: Sharpe ratio is a tool which measures the performance of security or portfolio in terms of risk-free…

Q: Consider the following average annual returns for Stocks A and B and the Market. Which of the…

A: The answer is in the explanation.Explanation:To determine which answer best describes the historical…

Q: Assume these are the stock market and Treasury bill returns for a 5-year period: Year 2016 2017 2018…

A: The risk premium for each year has been computed below:

Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary. 

Capital Asset Pricing Model

Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.