Txample 14: SBI and ICICI are two nutual funds. SBI has a sample mean ofsuccess 0.13 and lund 1CICI has a sample mean of success 0.18, with theiskier fund ICICI having doubled the beta at 2.0 as fund SBI. The respectivestandard deviations are 15% of ICICI and 19% of SBI. The nean return formarket index is 0.12, while the risk-free return is 8%.1) Compute the Jensen index for each of the funds. What does itindicate?2) Compute the Treynor index for the funds. Interpret the results andcompare it to the Jensen index.3) Compute the Sharpe index for funds and the market.

The question is to find the risk-adjusted index and return for the mutual fund portfolio. Jensen…

Example 14: SBI and ICICI are two mutual funds. SBI has a sample mean of success 0.13 and fund ICICI has a sample mean of success 0.18, with the riskier fund ICICI having doubled the beta at 2.0 as fund SBI. The respective standard deviations are 15% of ICICI and 19% of SBI. The mean return for market index is 0.12, while the risk-free return is 8%. 1) Compute the Jensen index for each of the funds. What does it indicate? 2) Compute the Treynor index for the funds. Interpret the results and compare it to the Jensen index. 3) Compute the Sharpe index for funds and the market.

Example 14: SBI and ICICI are two mutual funds. SBI has a sample mean of success 0.13 and fund ICICI has a sample mean of success 0.18, with the riskier fund ICICI having doubled the beta at 2.0 as fund SBI. The respective standard deviations are 15% of ICICI and 19% of SBI. The mean return for market index is 0.12, while the risk-free return is 8%. 1) Compute the Jensen index for each of the funds. What does it indicate? 2) Compute the Treynor index for the funds. Interpret the results and compare it to the Jensen index. 3) Compute the Sharpe index for funds and the market.

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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You have been given the following return information for a mutual fund, the market index, and the risk-free rate. You also know that the return correlation between the fund and the market is 0.97. Year 2018 2019 2020 2021 2022 Fund -19.4% 25.1 13.7 7.2 -1.98 Sharpe ratio Treynor ratio Market -37.5% 20.8 13.3 8.4 -4.2 Risk-Free 1% 4 2 6 2 What are the Sharpe and Treynor ratios for the fund? Note: Do not round intermediate calculations. Round your answers to 4 decimal places.
Consider the following information for three stocks, Stocks A, B, and C. The returns on the three stocks are positively correlated, but they are not perfectly correlated. (That is, each of the correlation coefficients is between 0 and 1.) Standard Deviation Stock Expected Return A 8.88% B с X 10.82 12.76 THATH 14% 14 14 Beta 0.8 1.2 Fund P has one-third of its funds invested in each of the three stocks. The risk-free rate is 5%, and the market is in equilibrium. (That is, required returns equal expected returns.) The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. 1.6 Open spreadsheet a. What is the market risk premium (H-AF)? Round your answer to two decimal places. b. What is the beta of Fund P? Do not round intermediate calculations. Round your answer to two decimal places. c. What is the required return of Fund P? Do not round intermediate calculations. Round your answer to two…
You have been given the following return information for a mutual fund, the market index, and the risk-free rate. You also know that the return correlation between the fund and the market is .98. Year 2015 2016 Fund -23.60% Market -44.50% Risk-Free 1% 25.10 21.50 3 2017 14.40 15.40 2 2018 2019 7.00 -2.40 9.20 -6.20 6 2 Calculate Jensen's alpha for the fund, as well as its information ratio. (Do not round intermediate calculations. Enter the alpha as a percent rounded to 2 decimal places. Round the ratio to 4 decimal places.) Jensen's alpha Information ratio %
Vijay
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Consider the following information for stocks A, B, and C. The returns on the three stocks are positively correlated, but they are not perfectly correlated. (That is, each of the correlation coefficients is between 0 and 1.) Stock Expected Return Standard Deviation Beta A B с 9.30% 10.35 12.10 14% 14 14 0.8 1.1 1.6 Fund P has one-third of its funds invested in each of the three stocks. The risk-free rate is 6.5%, and the market is in equilibrium. (That is, required returns equal expected returns.) a. What is the market risk premium (гM-TRF)? Round your answer to one decimal place. % b. What is the beta of Fund P? Do not round intermediate calculations. Round your answer to two decimal places. c. What is the required return of Fund P? Do not round intermediate calculations. Round your answer to two decimal places. % d. What would you expect the standard deviation of Fund P to be? I. Less than 14% II. Greater than 14% III. Equal to 14% -Select-
man.2
You have been given the following return information for a mutual fund, the market index, and the risk-free rate. You also know that the return correlation between the fund and the market is 0.97. Year 2018 Fund -18.80% Market -36.50% Risk-Free 1% 2019 25.10 20.70 6 2020 13.60 13.00 2 2021 2022 7.00 -1.92 8.40 -4.20 6 2 Calculate Jensen's alpha for the fund, as well as its information ratio. Note: Do not round intermediate calculations. Enter the alpha as a percent rounded to 2 decimal places. Round the ratio to 4 decimal places. Jensen's alpha Information ratio Answer is not complete. 3.69 %
You have been given the following return information for a mutual fund, the market index, and the risk-free rate. You also know that the return correlation between the fund and the market is 0.93. Year 2018 2019 2020 2021 2022 Fund -23.60% 25.10 14.40 7.00 -2.40 Market -44.50% 21.50 15.40 Jensen's alpha Information ratio 9.20 -6.20 Risk-Free 18 3 Calculate Jensen's alpha for the fund, as well as its information ratio. Note: Do not round intermediate calculations. Enter the alpha as a percent rounded to 2 decimal places. Round the ratio to 4 decimal places. 2 6 %
You have been given the following return information for a mutual fund, the market index, and the risk-free rate. You also know that the return correlation between the fund and the market is 0.97. Year Fund Market Risk-Free 2018 15.13% -25.5% 2% 2019 25.1 2020 12.5 2021 6.4 2022 -1.26 19.6 9.7 7.6 4 2 4 -2.2 3 What are the Sharpe and Treynor ratios for the fund? Note: Do not round intermediate calculations. Round your answers to 4 decimal places.
You have been given the following return Information for a mutual fund, the market Index, and the risk-free rate. You also know that the return correlation between the fund and the market is 0.93. Year 2018 2019 2020 2021 2022 Fund -23.60% 25.10 14.40 7.00 -2.40 Market -44.50% 21.50 15.40 9.20 -6.20 Jensen's alpha Information ratio Risk-Free 1% 3 2 6 2 Calculate Jensen's alpha for the fund, as well as Its Information ratio. Note: Do not round Intermediate calculations. Enter the alpha as a percent rounded to 2 decimal places. Round the ratio to 4 decimal places.

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