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. Standard Deviation 4% Portfolio Risk Free Rate Return 12.5% Beta 1.2 1.2 3% 10% 5% 4% E 3% 0.8 6% 6% Required: Calculate the Sharpe measure and the Treynor measure for cach portfolio.
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Q .1 What is the Sharpe measure of:
i. Portfolio A?
ii. Portfolio C?
iii. Portfolio E?
Q.2 What is the Treynor measure of:
i. Portfolio A?
ii. Portfolio C?
iii. Portfolio E?
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- Big Rock has several investment portfolios with a local mutual fund company. One of thecompany’s directors asked you to assess the performance of five of the portfolios. Portfolio Return Beta Standard Deviation Risk Free RateA 12.5% 1.2 4% 3%C 10% 1.2 5% 4%E 3% 0.8 6% 6% 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?1). Big Rock has several investment portfolios with a local mutual fund company. One of thecompany’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? 2). When you were at lunch, you overheard a heated conversation between two employees ofBig Rock. One was arguing a case for active fund management strategies and the otherwas arguing a case for passive fund management strategies.…You have just been appointed as a fund manager for Gate Way Fund, of which you will be responsible of a portfolio that consists of two assets. The analysts have provided you with the expected returns and standard deviations of returns of which are listed in the table below: Asset A Asset B Expected Return 7% 11% Standard Deviation 15% 21% Calculate the standard deviation of the portfolio if the assets are equally weighted. The two asset portfolio model can be extended two a portfolio with more assets. Explain the implications of this approach for the understanding of portfolio risk and discuss the practical problems of applying the model in this fashion.
- You have just been appointed as a fund manager for Gate Way Fund, of which you will be responsible of a portfolio that consists of two assets. The analysts have provided you with the expected returns and standard deviations of returns of which are listed in the table below: Asset A Asset B Expected Return 7% 11% Standard Deviation 15% 21% Calculate the expected return of the portfolio if half is invested in asset A. If the covariance of the two assets is 28, calculate the correlation coefficient of the portfolio. Calculate the variance of the portfolio if the investments in the two assets classes is equal. Calculate the standard deviation of the portfolio if the assets are equally weighted. The two asset portfolio model can be extended to a portfolio with more assets. Explain the implications of this approach for the understanding of portfolio risk and discuss the practical problems of applying the model in this fashion.Composite Portfolio Performance Measures Big Rock has several investment portfolios with a local mutual fund company. One of thecompany’s directors asked you to assess the performance of five of the portfolios.Portfolio Return Beta Standard Deviation Risk Free RateA 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?Bill Smith is evaluating the performance of four large-cap equity portfolios: Funds A, B, C, and D. As part of his analysis, Smith computed the Sharpe ratio and the Treynor's measure for all four funds. Based on his finding, the ranks assigned to the four funds are as follows: Fund Treynor Measure Rank Sharpe Ratio Rank A 1 4 B 2 3 C 3 2 D 4 1 Required: The difference in rankings for Funds A and D is most likely due to: multiple choice a lack of diversification in Fund A as compared to Fund D. different benchmarks used to evaluate each fund’s performance. a difference in risk premiums.
- An insurance fund is analysing the performance of three different fund managers A, B and C. Each manager invests in one third of all asset classes to maintain a well diversified portfolio. The following information is available: A B C Market portfolio Average net return (%) 5 8 9 9 Volatility (%) 18 24 21 20 Beta 0.8 1.1 1.3 A risk free rate is established to be 2%. Calculate for each of the fund managers the expected return using CAPM, ex post Sharpe Ratio, Treynor Ratio, M2 alpha and Jensen’s alpha. Interpret your results.A fund manager can invest in any combination of the three assets with the following expected returns and standard deviations: Asset 1: r1 = 2%, σ1 = 2% Asset 2: r2 = 6%, σ2 = 6% Asset 3: r3 = 4%, σ3 = 4% All three assets returns are uncorrelated: p12 = p13 =p 23 = 0 . Find a portfolio consisting of these three assets that achieves an expected return of 4% with the lowest risk possible. Show all steps.Suppose you manage an equity fund with the following securities. Use the following data to calculate the information ratio of each stock. Input Data Vogt Industries Isher Corporation Hedrock, Incorporated Alpha 0.012 0.006 0.016 Beta 0.277 1.015 1.630 Standard Deviation 0.156 0.168 0.181 Residual Standard Deviation 0.117 0.048 0.113 Required: Using the information in the table above, please calculate the information ratio for each stock. (Use cells A5 to D8 from the given information to complete this question.) Vogt Industries Isher Corporation Hedrock, Incorporated Information Ratio
- Suppose you manage an equity fund with the following securities. Use the following data to help build an active portfolio. Input Data Vogt Industries Isher Corporation Hedrock, Incorporated Alpha 0.012 0.006 0.016 Beta 0.277 1.015 1.630 Standard Deviation 0.156 0.168 0.181 Residual Standard Deviation 0.117 0.048 0.113 Information Ratio 0.1026 0.1250 0.1416 Alpha/Residual Variance 0.877 2.604 1.253 Market Data S&P 500 Treasury Bills Expected Raturn 12.00% 2.50% Standard Deviation 20.00% 0.00% Required: Using the information in the table above, please first calculate the initial weight of each stock in an active portfolio, using the Treynor Black approach. Then adjust each weight for beta. (Use cells A5 to D14 from the given information to complete this question.) Treynor-Black Model Vogt Industries Isher Corporation Hedrock, Incorporated…The following data are available for two assets A and B: E(rA) = 13% E(rB) = 15% s(rA) = 22% s(rB) = 24% rA,B = 0 Let WA and WB denote the proportions of funds invested in assets A and B such that WA + WB=1. If portfolio has to be a minimum risk portfolio, find the weights.Consider the following performance data for two portfolio managers (A and B) and a common benchmark portfolio: BENCHMARK MANAGER A MANAGER B Weight Return WEIGHT RETURN WEIGHT RETURN Stock 0.7 -4.7 0.7 -3.8 0.2 -4.7 % Bonds 0.2 -4.0 0.1 -2.2 0.6 -4.0 Cash 0.1 0.3 0.2 0.3 0.2 0.3 Calculate (1) the overall return to the benchmark portfolio, (2) the overall return to Manager A’s actual portfolio, and (3) the overall return to Manager B’s actual portfolio. Briefly comment on whether these managers have under- or outperformed the benchmark fund. Round your answers to two decimal places. Use a minus sign to enter negative values, if any. Overall return Benchmark % Manager A % Manager B % Using attribution analysis, calculate (1) the selection effect, and (2) the allocation effect for both Manager A and Manager B. Using these numbers in conjunction with your results from Part a, comment on whether these managers have added value…