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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Investor has had the following returns in the Magic Fund for the past 4 years: 15%, 25%, -30%, 18%. c) State whether the annual geometric return (assume positive) should be higher, lower, or the same as the annual arithmetic return. Neither calculation nor explanation is necessary. d) State which measure, annual arithmetic return or annual geometric return, better represents how an investment performed over time. Neither calculation nor explanation is necessary.
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?
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?
A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term bond fund, and the third is a money market fund that provides a safe return of 8%. The characteristics of the risky funds are as follows: Stock fund (S) Bond fund (B) The correlation between the fund returns is 0.11. Expected Return 19% 12 Required: a-1. What are the investment proportions in the minimum-variance portfolio of the two risky funds? a-2. What are the expected value and standard deviation of the minimum-variance portfolio rate of return? Req A1 Complete this question by entering your answers in the tabs below. Reg A2 What are the investment proportions in the minimum-variance portfolio of the two risky funds? Note: Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places. Portfolio invested in the stock Portfolio invested in the bond Standard Deviation 32% 15 Req A1 A pension fund manager is considering three mutual funds. The…
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.) (…)
Mercury Mutual Fund realized a return of 17% in its growth fund in the year 2018-19. The market index returned 12.5%. Standard deviation of the portfolio was 20% & the standard deviation of index returns was 8%.The correlation between the portfolio & the market was found to be 44%. The the risk-free rate was 4%. You are required to estimate the Treynor’s ratio and Jensen’s alpha of the portfolio. Also state your interpretation of the result.?
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Your employer has asked you to investigate the firm’s portfolio risk and return. The portfolio comprises three stocks. It is invested 50 percent in stock A, 30 percent in stock B and 20 percent in stock C. You gathered the following information: a) Determine what is the portfolio’s expected return b) Determine the portfolio’s variance and standard deviation c) Assume that the expected risk-free rate is 2.75 percent. Determine the expected risk premium on the 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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