As an assistant manager of an equity mutual fund, you are asked to write a report analysing shares and share performances. As part of your analysis you have collected the following annual returns for share A and share B over the past five years A B 2014 2.50% 3.20% 2015 3.40% -1.25% 2016 -1.50% -4.25% 2017 4.50% 2.20% 2018 1.10% 6.50% Q1) Calculate the expected return and standard deviation of shares A and B during the 5-year period Q2) Calculate the covariance and correlation between the returns on shares A and B during the 5-year period Q3) Calculate the return and standard deviation of the portfolio that consists of 65% in asset A and 35% in asset B during the 5-year period Q4) Calculate the Sharpe ratio of the portfolio assuming that the risk-free rate is expected to remain at 0.5% per annum. What info does the Sharpe ratio give to an investor?
As an assistant manager of an equity mutual fund, you are asked to write a report analysing shares and share performances. As part of your analysis you have collected the following annual returns for share A and share B over the past five years A B 2014 2.50% 3.20% 2015 3.40% -1.25% 2016 -1.50% -4.25% 2017 4.50% 2.20% 2018 1.10% 6.50% Q1) Calculate the expected return and standard deviation of shares A and B during the 5-year period Q2) Calculate the covariance and correlation between the returns on shares A and B during the 5-year period Q3) Calculate the return and standard deviation of the portfolio that consists of 65% in asset A and 35% in asset B during the 5-year period Q4) Calculate the Sharpe ratio of the portfolio assuming that the risk-free rate is expected to remain at 0.5% per annum. What info does the Sharpe ratio give to an investor?
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:As an assistant manager of an equity mutual fund, you are asked to write a report analysing
shares and share performances. As part of your analysis you have collected the following annual
returns for share A and share B over the past five years
A
B
2014
2.50%
3.20%
2015
3.40%
-1.25%
2016
-1.50%
-4.25%
2017
4.50%
2.20%
2018
1.10%
6.50%
Q1) Calculate the expected return and standard deviation of shares A and B during the 5-year
period
Q2) Calculate the covariance and correlation between the returns on shares A and B during the
5-year period
Q3) Calculate the return and standard deviation of the portfolio that consists of 65% in asset A
and 35% in asset B during the 5-year period
Q4) Calculate the Sharpe ratio of the portfolio assuming that the risk-free rate is expected to
remain at 0.5% per annum. What info does the Sharpe ratio give to an investor?
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