Answered: f a fund has a return of 12% and a beta…

f a fund has a return of 12% and a beta of 1.4, and if the risk-free rate is 2%, and market return rate is 8%, calculate Jensen's Alpha O a. 3.6

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

See similar textbooks

Related questions

Q: Given the current risk-free rate is 9% and the market return is 12%. Investment Beta A 0.65 1.12…

A: The required rate of return represents the minimum return investors willing to accept for the given…

Q: If the risk-free rate is 10.2% and the market risk premium is 4.4%, what is the required return for…

A: In the Given question we require to calculate the required return for the market from the following…

Q: If you perform a NPV analysis on a perspective investment using a "d" = 15% and: a. the…

A: “Hi There, Thanks for posting the questions. As per our Q&A guidelines, must be answered only…

Q: The NXP fund has an expected return of 3.60%, with volatility 24.00%. The risk free rate is 1.70%,…

A: The reward-to-volatility ratio, also known as the Treynor ratio, gauges how much excess return a…

Q: c) Calculate Jensen's measure of performance for Wildcat Fund. d) Assuming that the Wildcat fund…

A: Jensen's measure of performance for Wildcat Fund is calculated with the help of following formula…

Q: 1. Consider the table below which lists a set of portfolios with each of their expected return E(R)…

A: To create the efficient frontier, we plot the expected return (E(R)) on the y-axis and the standard…

Q: Review the table below listing performance metrics for selected assets. The metrics are defined in…

A: The table provides performance metrics for four assets: a riskless asset, the market portfolio, and…

Q: 1. Consider the table below which lists a set of portfolios with each of their expected return E(R)…

A: To plot the portfolios and create the efficient frontier, we plot the expected return (E(R)) on the…

Q: The average return, standard deviation, and beta for Fund A is given below along with data for the…

A: Share Measure of Performance of Fund A Sharpe Measure means the Amount of return per unit of risk.…

Q: The average return, standard deviation, and beta for Fund A is given below along with data for the…

A: Jensen's alpha = Average return less CAPM return of stock

Q: Asset A has an expected return of 22.8% and a beta of 1.8. The expected market return is 14%. What…

A: The risk free rate can be calculated as per the capital asset pricing model.

Q: Prob. of state S&P 500 Technology T-Bills -15% State International Fund + 1% GDP .25 8% 5% 30% + 2%…

A: Expected return of the market could be computed by multiplying the returns under different economic…

Q: harpe’s ratio of the Fund A is 1.5, if the beta of Fund A is 1.2, and risk of the fund is 10,…

A: Solution Given Sharpe’s ratio of the Fund A 1.5 beta of Fund A 1.2 risk of the fund…

Q: Find the optimal risky portfolio if you could only use these two funds, ABC and 123, assume the two…

A: Here, ABC 123 Expected return 0.12 0.15 Standard Deviation 0.2 0.3 Correlation…

Q: a. What is the market risk premium (M-FRF)? Round your answer to two decimal places. 96 b. What is…

A: CAPM is the model that is used to show the linear relation between systematic risk…

Q: 4. Asset Z has an expected return of 9.5 percent and a beta of 0.85. If the risk-free rate is 2.2…

A: We can determine the expected return of the portfolio using the formula below: Expected Return =…

Q: The risk-free rate and the expected market return are 5% and 12%, respectively. According to the…

A: The model that explains the association between expected return and systematic risk is called the…

Q: Risky asset P (an index fund) and risk-free asset F (T-Bill), form a complete portfolio C using P…

A: Sy < 1:Step 1: Define the components of the portfolio.Risky asset (P): Expected return is 15%,…

Q: Electric fund had expected return of 15% and standard deviation for this return is 26%. Beta and…

A: Expected return (Re) = 15% Risk free rate (Rf) = 4% Standard deviation (SD) = 26%

Q: The Manhawkin Fund has an expected return of 17% and a standard deviation return of 33%. The risk…

A: Sharpe ratio is one of the financial metric which is used to analyze the performance of various…

Q: d) The return on the risk-free asset is 5%. You are given the following information: Security Firm A…

A: Risk free rate (Rf) = 0.05Market return (Rm) = 0.12Market standard deviation (Sm) = 0.20

Q: II. Capital Asset Pricing Model. Leah Vine has gathered the following information of three Mutual…

A: Hi, there, thanks for posting the question. As per our honour code, we will answer the first three…

Q: For investment A, the probability of the return being 20.0% is 0.5, 10.0% is 0.4, and -10.0% is 0.1…

A: Probability Return 0.5 20% 0.4 10% 0.1 -10%

Q: What is the required return on an investment with a beta of 1.4 if the risk-free rate is 2.2 percent…

A: Formula:- Required return = Risk free rate + beta*(market rate- risk free rate)

Q: Risky asset P (an index fund) and risk-free asset F (T-Bill), form a complete portfolio C using P…

A: Given:E(rP)=0.15σP=0.22rf=0.07A=4Calculate y∗: y* = E(rp) - rf / (4 * σp^2)= (15% - 7%) / (4 *…

Q: If $x is invested in mutual fund A, the annual return has an expectation of $0.1x and a standard…

A: Here,Expectation of Fund A is $0.1 of invetsed AmountExpectation of Fund B is $0.1 of invested…

Q: USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Asset (A) Asset (B) E(RA) = 10% E(RB) = 15%…

A: Standard deviation of the portfolio is the statistical measure to determine the risk of change in…

Q: The risk free rate is 9.5%. If the market portfolio has a mean return of 6.6%, what security market…

A: The capital assets pricing model has been represented by the SML line which gives you required rate…

Q: Suppose that a fund that tracks the S&P has mean E(RM) = 16% and standard deviation OM = 10%, and…

A: Standard Deviation is mesaure the risk which is involved in earning the return from the stock. Lower…

Q: It measures how much rate of return the fund manager/fund generates per unit of systematic risk…

A: Financial investments are the methods through which investors park or save their funds and money in…

Q: The NXP fund has an expected return of 3.60%, with volatility 24.00%. The risk free rate is 1.70% ,…

A: The reward-to-volatility ratio, also known as the Treynor ratio, gauges how much excess return a…

Q: Calculate and label the market risk premium

A: Security Market Line or SML is the upward sloping straight line. This line is the graphical…

Q: Annual returns for three funds and a market index are given below: Fund A Rp 17.1 Op 28.1 Beta (Bp)…

A: A portfolio is a basket or a group of individual assets or securities. Portfolio Management is…

Q: You plan to invest in either a mutual fund X or mutual fund Y. The following information about the…

A: Two asset portfolio expected return: The anticipated return on an investment is the value assigned…

Q: You want to evaluate two mutual funds using the information ratio measure for performance…

A: Sharpe ratio refers to the method used for the measurement of the volatility of the returns related…

Q: Based on the hypothetical portfolios provided in the table below, which of the portfolios would lie…

A: Portfolios lying on the efficient frontier are considered the most desirable as they provide the…

Q: rate of return on security X with a beta of 1.25 is equal to:

A: The Capital Asset Pricing Model (CAPM) describes the relationship between systematic risk and…

Q: 6. Consider an optimal risky portfolio with expected return of 8% and standard deviation of 26% and…

A: The slope of the best feasible Capital Allocation Line (CAL) of the optimal portfolio as follows:…

Q: The possible returns of a security I and research returns under three possible states are as…

A: Step 1: Calculate the Expected ReturnsExpected Market Return (E(Rm)): Expected Return…

Q: The beta of the risk-free asset is: 0.5 0.5 1.0 -1.0 2.0

A: In this question we need to tell the value of beta of risk free asset.

Q: Baghiben

A: The objective of the question is to determine the percentage of Portfolio Y's return that is driven…

Q: If a fund has a return of 10% and a beta of 1.5, and if the risk-free rate is 5%, and market return…

A: Jensen's Alpha measures the excess of actual return over expected return as per Capital asset…

Question

If a fund has a return of 12% and a beta of 1.4, and if the risk-free rate is 2%, and market return rate is 8%, calculate Jensen's Alpha

O a. 3.6

Ob. 2.4

O c. 1.6

Od. 1.4

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Similar questions

Fund Beta Deviation (%) Return (%) Rf (%) XXX 1.07 5.13 19 6 YYY 1.02 4.28 17 6 ZZZ 0.86 3.52 12 6 Market 1 3.8 13 6 Compute the Sharpe Measure for the XXX fund. Compute the Treynor Ratio for the ZZZ fund. Compute the Jensen Measure for the YYY fund.
A fund achieved a return of 9.5%; the risk free rate was 1.5% and the market portfolio achieved 6%. The fund had a target Beta of 0.8, but was actually 1.25. The fund had a standard deviation of 28%, and the market had a standard deviation of 16%. (a) Calculate the following performance measures for the fund: • Sharpe ratio • Jensen’s alpha • Treynor ratio (b) Calculate whether the fund or the market portfolio would have provided more utility to an investor with a risk aversion coefficient, A, of 1.0
Calculate the returns as per sharpe's, treynor and jensen performance measures and comment on the best investment
4
assume that risk free rate, RF, is currently 8%, the market return, 1m, is 12%, and asset a beta ba, is 1.10. (a) Draw the SML on a set of "non-diversifiable risk Please sent me complete this question for further reliance.
Đ The risk free rate is 3%. Calculate and rank the following funds using Jensen's Alpha, Treynor measure, Sharpe ratio and M Fund 4 5.82% Market Index 7.60% Fund 1 Fund 2 Fund 3 Return 6.45% 8.96% 9.44% 0.88 1.02 1.38 0.80 1% Beta Std. dev. 2.74% 4.54% 3.72% 2.64% 2.80%
The average return, standard deviation, and beta for Fund A is given below along with data for the S&P 500 Index. Fund Average Return Standard Deviation Beta A 14.5% 24.6% 1.4 S&P 500 14.5% 21.3% 1 Risk-free 1% Calculate the Sharpe measure of performance for the S&P 500.
2
The average return, standard deviation, and beta for Fund A is given below along with data for the S&P 500 Index. Fund Average Return Standard Deviation Beta A 25.7% 29% 1.3 S&P 500 17.9% 20% 1 Risk-free 3.8% Calculate the M2 measure of performance for Fund A. Use the correct sign if the answer is negative! Example: -1.23
In the following exercise, separate the investments according to the type of Keynesian demand they are: Transactions (0% to 5%), Precautionary (6% to 9%), and Speculative demand (greater than 10%). Investment in each category has the same risk. So you want to invest in the highest return for the same risk. Take each demand type and choose the highest return and put that amount into the investment. For example, if Bond fund A has a return of 4% and Fund B has a return of 5%, they have the same risk, so you would put $70 into bond fund B. You have the following investments Opportunities ad returns. Fidelity Bonds 11% Fidelity Magellan 9% Putman Bonds one 4% Putman bonds Two 12% Growth Stock One 15% Growth and Income 8% Income Fund 3% Putman Growth…
Assume that the risk-free rate, RF, is currently 9% and that the market return, rm, is currently 16%. a. Calculate the market risk premium. b. Given the previous data, calculate the required return on asset A having a beta of 0.4 and asset B having a beta of 1.8.
Consider the following risk-return characteristics for funds A and B: Expected return Risk Fund A (Equity) 12% 20% Fund B (Debt) 9% 16% The correlation coefficient between the returns of fund A and fund B is 0.4. 1. Which Fund is riskier? Write 1 if your answer is Fund A, write 2 if your answer is Fund B, or write 3 if your answer is undetermined. 2.1 What is the weight of fund A in the minimum variance portfolio? 2.4 What is the risk of the minimum variance portfolio? 2.2 What is the weight of Fund B in the minimum variance portfolio? 2.3 What is the expected return of the minimum variance portfolio?

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS