(please don't use Ai solution) If your maximum Sharpe ratio increased from 0.333 to 0.444 when adding a positive-alpha (open-ended) mutual fund to your portfolio, and the fund's idiosyncratic volatility was 15%, what was thefund's alpha? (report your answer rounded to the nearest 3 decimals -- eg., 0.8765 % --> 0.877, 0.8763 --> 0.876)

Step by step solution using the information provided about Sharpe ratios and mutual fund…

Answered: If your maximum Sharpe ratio increased…

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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As an equity analyst, you have developed the following return forecasts and risk estimates for two different stock mutual funds (Fund T and Fund U}: Forecasted Return CAPM Beta Fund T 9.00% 1.20 Fund U 10.00% 0.80 a. If the risk-free rate is 3.9 percent and the expected market risk premium (£(RM) -RFR} is 6.1 percent, calculate the expected return for each mutual fund according to the CAPM. b. Using the estimated expected returns from part (a) along with your own return forecasts, demonstrate whether Fund T and Fund U are currently priced to fall directly on the security market line (SML), above the SML, or below the SML. c. According to your analysis, are Funds T and U overvalued, undervalued, or properly valued?
CAPM As an equity analyst, you have developed the following return forecasts and risk estimates for two different stock mutual funds (Fund T and Fund U): Fund T Fund U Forecasted Return CAPM Beta 1.20 0.80 9.0% 10.0 a. If the risk-free rate is 3.9 percent and the expected market risk premium (E(RM)-RFR) is 6.1 percent, calculate the required return for each mutual fund according to the CAPM. b. Using the estimated required of returns from part (a) along with your return forecasts, demonstrate whether Fund T and Fund U are currently priced to fall directly on the security market line (SML), above the SML, or below the SML. c. According to your analysis, are Funds T and U overvalued, undervalued, or properly valued?
As an equity analyst, you have developed the following return forecasts and risk estimates for two different stock mutual funds (Fund T and Fund U): Fund T Fund U Forecasted Return 9.0% 10.0 CAPM Beta 1.20 0.80 a) If the risk-free rate is 3.9 % and the expected market risk premium is 6.1%, calculate the expected return for each mutual fund according to the CAPM. b) Using the estimated expected returns from Part a along with your own return forecasts, explain whether Fund T and Fund U are currently priced to fall directly on the security market line (SML), above the SML, or below the SML. Are Funds T and U overvalued, undervalued, or properly valued?
Consider the following information for 3 mutual fund P, Q, R and the market.Mutual fund Mean Return Risk BetaP 25% 1.785 1.10Q 16% 0.962 1.29R 19% 1.322 1.55Market 16% 1.00The risk free rate was 12%. Calculate the Treynor, Sharpe & Jenson Measure andrank the same.
Nikul
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You are evaluating a closed-end mutual fund and see that its price is different from its net asset value (NAV). The fund has an expense ratio (ε) of 2.80% and a dividend yield (Ō) of 4.00%. The fund has experienced a risk-adjusted abnormal return (a) of 3.40%. By what amount (premium or discount) is the fund likely to trade relative to its NAV? Note: Use a minus sign if the amount is a discount. Round your answer to 2 decimal places. Amount 0.99 %
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 0.87. Year 2018 2019 2020 2021 2022 Fund -14.85% 25.10 12.90 7.20 -1.50 Market -29.50% 20.00 10.90 8.00 -3.20 Jensen's alpha Information ratio. Risk-Free 3% 5 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. (0.0072)
Suppose you have some money to invest-for simplicity, $1-and you are planning to put a fraction w into a stock market mutual fund and the rest, 1 w, into a bond mutual fund. Suppose that $1 invested in a stock fund yields R after 1 year and that $1 invested in a bond fund yields Rp. suppose that R, is random with mean 0.08 (8%) and standard deviation 0.07, and suppose that R, is random with mean 0.05 (5%) and standard deviation 0.04. The correlation between R. and R, is 0.27. If you place a fraction w of your money in the stock fund and the rest, 1 the bond fund, then the return on your investment is R = wR₂ + (1-w)Rp. - Suppose that w = 0.53. Compute the mean and standard deviation of R. The mean is. (Round your response to three decimal places.) The standard deviation is. (Round your response to three decimal places.) w, in
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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 .97. Year Fund Market Risk-Free 2015 −18.80 % −36.50 % 1 % 2016 25.10 20.70 6 2017 13.60 13.00 2 2018 7.00 8.40 6 2019 −1.92 −4.20 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.)

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