An investor considers adding the Cobalt High Income Fund to her portfolio. Cobalt has returned 18% over the previous year while the risk-free rate is 3%. Measures of risk for Cobalt include a beta of 1.5 and a standard deviation of 25%. The return on the relevant benchmark over the previous year is 13% with a standard deviation of 17%. The investor's estimate of the Jensen's alpha for the Cobalt Fund is closest to: Select one OA. -0.01. OB. 0.00. OC. 0.01. OD. 0.05.

An investor considers adding the Cobalt High Income Fund to her portfolio. Cobalt has returned 18% over the previous year while the risk-free rate is 3%. Measures of risk for Cobalt include a beta of 1.5 and a standard deviation of 25%. The return on the relevant benchmark over the previous year is 13% with a standard deviation of 17%. The investor's estimate of the Jensen's alpha for the Cobalt Fund is closest to: Select one OA. -0.01. OB. 0.00. OC. 0.01. OD. 0.05.

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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Similar questions

The 10-year historical return of your new mutual fund investment is 9.64%. During that same 10-year period the Standard Deviation (SDEV) of returns for that fund has been 7.73%. What are the possible future ranges of returns given the following confidence levels: 67% Confidence: Returns between ________ and ________; 95% Confidence: Returns between ________ and _______
A manager's portfolio generated a return of 11.3% over the past year. The portfolio's beta was 1.16 and the return standard deviation was 15.7%. The market return was 9.8%, its return standard deviation was 13.4%, and the risk-free rate was 3.7%. What are the portfolio's Sharpe ratio, Treynor ratio, and Jensen's alpha?
An investor puts 60% of her assets in a risky portfolio with an expected return of 15% and variance of .038. She puts the remaining 40% in T-bills that pay 3%. What are a.) the expected return and b.) the standard deviation of her portfolio?
You are an analyst for a large public pension fund and you have been assigned the task of evaluating two different external portfolio managers (Yellen and Zagami) who (actively) manage two funds which are considering. Your associates have assembled the following historical average return, standard deviation, and CAPM beta estimates for these two fund managers over the past five years. In addition, you have estimated that the risk premium for the market portfolio is 5.12% and the risk-free rate is currently 4.14%. What is Ms. Yellen's average "alpha" for the period. Report your answer in percentage format rounded to three decimal places. (For example.1234 should be entered as "12.3"). Fund Manager Actual Avg. Return Standard Deviation Ms. Yellen 11% Mr. Zagami 8.24% Answer: 11.07 8.75% Beta 1.18 0.9
Suppose Taneal is considering combining the two portfolios into a single portfolio. If she invests 60% in Portfolio A and 40% in Portfolio B: i. Determine the return of the new portfolio ii. If the standard deviation for portfolio B was 19%, comment on the risk of the new portfolio, supported with calculations. iii. Should Taneal combine these two portfolios? Why?
You are considering investing in a mutual fund. The fund is expected to earn a return of 12 percent in the next year. If its annual return is normally distributed with a standard deviation of 4.50 percent, what return can you expect the fund to beat 95 percent of the time? what is the expected return(%)?
Big Rock has several investment portfolios with a local mutual fund company. One of the company's directors asked you to assess the performance of five of the portfolios. Portfolio Return Beta Standard Deviation Risk Free Rate A 12.5% 1.2 4% 3% C 10% 1.2 5% 4% E 3% 0.8 6% 6% Required: Calculate the Sharpe measure and the Treynor measure for each portfolio. a. What is the Sharpe measure of: i. Portfolio A? ii. Portfolio C? iii. Portfolio E? b. What is the Treynor measure of: i. Portfolio A? ii. Portfolio C? iii. Portfolio E?
Chee Chew's portfolio has a beta of 1.25 and earned a return of 13.6% during the year just ended. The risk-free rate is currently 3.9%. The return on the market portfolio during the year just ended was 10.7%. a. Calculate Jensen's measure (Jensen's alpha) for Chee's portfolio for the year just ended. b. Compare the performance of Chee's portfolio found in part a to that of Carri Uhl's portfolio, which has a Jensen's measure of -0.19. Which portfolio performed better? Explain. c. Use your findings in part a to discuss the performance of Chee's portfolio during the period just ended. a. The Jensen's measure (Jensen's alpha) for Chee's portfolio is (Round to two decimal places.) (…)
An investor is evaluating the historical performance of an investment fund. The following annual returns are provided to the investor: Fund Value Year 0 $120 Year 1 132 Year 2 146 Year 3 133 Year 4 128 Year 5 123 Required: a. Calculate the investment returns for each year. b. Compute the arithmetic mean return. c. Calculate the geometric mean return.
a) Calculate Sharpe's measure of performance for Wildcat Fund. b) Calculate Treynor's measure of performance for Wildcat Fund.
An investor can design a risky portfolio based on two funds, HighYieldBond and SmallCapStock. Fund HighYieldBond has an expected return of 20% and a standard deviation of return of 34%. Fund SmallCapStock has an expected return of 25% and a standard deviation of return of 38%. The correlation coefficient between the returns on HighYieldBond and SmallCapStock is 0.31. If an investor puts 0.45 into fund HighYieldBond, what is the standard deviation of the return on this portfolio?
Your portfolio allocates equal funds to DW Company and Woodpecker, Incorporated. DW Company stock has an annual return mean and standard deviation of 15.5 percent and 44 percent, respectively. Woodpecker stock has an annual return mean and standard deviation of 12.6 percent and 44 percent, respectively. The return correlation between DW and Woodpecker is zero. What is the smallest expected loss for your portfolio in the coming month with a probability of 16 percent? Note: A negative value should be indicated by a minus sign. Do not round intermediate calculations. Round the z-score value to 3 decimal places when calculating your answer. Enter your answer as a percent rounded to 2 decimal places. X Answer is complete but not entirely correct. Smallest expected loss -20.43 × %

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