Consider a small cap value portfolio where the investment manager generates 0.26% of Carhart alpha. The risk-free rate of return is 2.25%, the return of the market is 9.75%, the value risk premium is 3.50% and the size premium is 2.55%. This manager has an exposure to the value premium of 75% and a 35% exposure to the size premium. The consultant, who advises the client on the performance of the manager uses CAPM to assess manager performance and has determined the investment manager generated 0.68% of Jensen’s alpha. Determine the value for Beta the consultant is using. There is insufficient information to answer the question 1.41 1.44 1.39

Consider a small cap value portfolio where the investment manager generates 0.26% of Carhart alpha. The risk-free rate of return is 2.25%, the return of the market is 9.75%, the value risk premium is 3.50% and the size premium is 2.55%. This manager has an exposure to the value premium of 75% and a 35% exposure to the size premium. The consultant, who advises the client on the performance of the manager uses CAPM to assess manager performance and has determined the investment manager generated 0.68% of Jensen’s alpha. Determine the value for Beta the consultant is using. There is insufficient information to answer the question 1.41 1.44 1.39

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter3: Risk And Return: Part Ii

Section: Chapter Questions

Problem 2P: APT An analyst has modeled the stock of Crisp Trucking using a two-factor APT model. The risk-free...

See similar textbooks

Similar questions

M4
You are a portfolio manager who uses options positions to customize the risk profile of your clients. In each case, what strategy is best given your client’s objective?a. ∙ Performance to date: Up 16%.∙ Client objective: Earn at least 15%.∙ Your scenario: Good chance of large gains or large losses between now and end of year.i. Long straddle.ii. Long bullish spread.iii. Short straddle. b. ∙ Performance to date: Up 16%.∙ Client objective: Earn at least 15%.∙ Your scenario: Good chance of large losses between now and end of year.i. Long put options.ii. Short call options.iii. Long call options.
Problem 3: Evaluating portfolio performance Assume you have two investment opportunities. 1. Corporate Disasters (CD) has expected returns E(RcD) = 4% and standard deviation of returns 9%. 2. Nevada beach front properties (NBF) has expected returns E(RygF) = 10% and standard deviation of returns 18% Risk free rate is R; = 1%. a) Calculate Sharpe ratios of these two portfolios. b) Assume you can invest only in one of those companies (and a risk free rate). Assume your target rate of return is 6%. Calculate portfolios with CD&RF and NBF&RF which would deliver this return. Which portfolio has smaller standard deviation and why? c) Assume you have a portfolio which is not efficient. Assume Corporate Disasters have market beta of ßep = 0.5 and Nevada beach front properties have market beta BNef = 4. Calculate Treynor measures for those securities. Which one should you add to your portfolio to increase the Sharpe ratio.
You manage a risky portfolio with an expected rate of return of 10% and a standard deviation of 29%. The T-bill rate is 3%. Stock A Stock B Stock C 27% 32% 41% Suppose that your client decides to invest in your portfolio a proportion y of the total investment budget so that the overall portfolio will have an expected rate of return of 8%. Required: a. What is the proportion y? b. What are your client's investment proportions in your three stocks and the T-bill fund? c. What is the standard deviation of the rate of return on your client's portfolio? Complete this question by entering your answers in the tabs below. Required A Required B Required C X Answer is not complete. What is the proportion y? Note: Round your answer to the nearest whole number. Proportion y 71 %
Assume that you manage a risky portfolio with an expected rate of return of 15% and a standard deviation of 40%. The T-bill rate is 5% A client prefers to invest in your portfolio a proportion (y) that maximizes the expected return on the overall portfolio subject to the constraint that the overall portfolio's standard deviation will not exceed 30%. What is the investment proportion, y? What is the expected rate of return on the overall portfolio
You manage a risky portfolio with an expected rate of return of 11% and a standard deviation of 37%. The T-bill rate is 4%. Stock A 29% Stock B Stock C 35% 36% Suppose that your client decides to invest in your portfolio a proportion y of the total investment budget so that the overall portfolio will have an expected rate of return of 10%. Required: a. What is the proportion y? b. What are your client's investment proportions in your three stocks and the T-bill fund? c. What is the standard deviation of the rate of return on your client's portfolio? Complete this question by entering your answers in the tabs below. Required A Required B Required C What is the proportion y? Note: Round your answer to the nearest whole number. Proportion y %
Problem 3: You have access to two investment opportunities. Mutual Fund A, which promises 20% expected return with a variance of 0.36, and Mutual Fund B, which promises 15% expected return with a variance 0f 0.12. The covariance between the two is 0.084. 1. Suppose that you seek to construct a portfolio with an expected return equal to 18%. What proportions of your wealth should you invest in A and B? What is the standard deviation of such portfolio? 2. In addition to the funds A and B in the previous question, now you decide to include fund C to your portfolio. Its expected return is 10, its variance 0.0625, its correlation with A is 0.1050 and its correlation with B is 0.07. You want to achieve an expected return of 16% on your portfolio, with the minimum possible risk (measured by the standard deviation). Derive analytically (that is, without the help of solver, but trough calculus) the weights of such desired portfolio, and its standard deviation.
Assume you manage a risky portfolio with an expected rate of return of 15% and a standard deviation of 29%. The T-Bill Rate is 3.5%. You have a new client who has historically invested in a portfolio with a risk premium of 11% and a sigma of 22%. What is your client’s Risk Aversion? (rounded to two places) Group of answer choices 2.15 3.11 2.27 2.76 None of the above
Vijay
You manage a risky portfolio with an expected rate of return of 13% and a standard deviation of 34%. The T-bill rate is 2%. Stock A Stock B Stock C 45% 32% 23% Suppose that your client decides to invest in your portfolio a proportion y of the total investment budget so that the overall portfolio will have an expected rate of return of 11%. Required: a. What is the proportion y? b. What are your client's investment proportions in your three stocks and the T-bill fund? c. What is the standard deviation of the rate of return on your client's portfolio? Complete this question by entering your answers in the tabs below. Required A Required B Required C What is the proportion y? Note: Round your answer to the nearest whole number. Proportion y %
A risk-averse Investor is Interested to know the Sharpe ratio of the portfollo to make an Investment decision. The expected return of the portfolio is 15%. The return on the risk-free Investment is 2.5%. The prevailing expected market return is 10% while the portfolio standard deviation is 5%. Calculate the Sharpe ratio of the Investment. The Sharpe ratio is 1.5. The Sharpe ratio is 2.5. The Sharpe ratio is 0.07. The Sharpe ratio is 3.
Assume analysts provide the following types of information. Assume no short selling and a risk free-rate of 10%. What is the optimal investment? Expected Return Standard Deviation Asset 1 10% 5% Asset 2 4% 2%