Kelli Blakely is a portfolio manager for the Miranda Fund, a core large-cap equity fund. The benchmark for performance measurement purposes is the S&P 500. Although the Miranda portfolio generally mirrors the asset class and sector weightings of the S&P, Blakely is allowed a significant amount of leeway in managing the fund. Blakely was able to produce exceptional returns last year (as outlined in the table below) through her market timing and security selection skills. At the outset of the year, she became extremely concerned that the combination of a weak economy and geopolitical uncertainties would negatively impact the market. Taking a bold step, she changed her market allocation. For the entire year her asset class exposures averaged 50% in stocks and 50% in cash. The S&P's allocation between stocks and cash during the period was a constant 97% and 3%, respectively. The risk-free rate of return was 2%. One-Year Trailing Returns Miranda Fund 10.2% 37% 1.10 Return Standard deviation Beta Required: a. What are the Sharpe ratios for the Miranda Fund and the S&P 500? (Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Round your answers to 4 decimal places.) Sharpe ratio for the Miranda Fund Sharpe ratio for the S&P 500 S&P 500 -22.5% 44% 1.00 M 2 measure for Miranda 0.2216 (0.5568) b. What are the M² measures for Miranda and the S&P 500? (Do not round intermediate calculations. Round your answer to 2 decimal places.) 11.75 %
Kelli Blakely is a portfolio manager for the Miranda Fund, a core large-cap equity fund. The benchmark for performance measurement purposes is the S&P 500. Although the Miranda portfolio generally mirrors the asset class and sector weightings of the S&P, Blakely is allowed a significant amount of leeway in managing the fund. Blakely was able to produce exceptional returns last year (as outlined in the table below) through her market timing and security selection skills. At the outset of the year, she became extremely concerned that the combination of a weak economy and geopolitical uncertainties would negatively impact the market. Taking a bold step, she changed her market allocation. For the entire year her asset class exposures averaged 50% in stocks and 50% in cash. The S&P's allocation between stocks and cash during the period was a constant 97% and 3%, respectively. The risk-free rate of return was 2%. One-Year Trailing Returns Miranda Fund 10.2% 37% 1.10 Return Standard deviation Beta Required: a. What are the Sharpe ratios for the Miranda Fund and the S&P 500? (Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Round your answers to 4 decimal places.) Sharpe ratio for the Miranda Fund Sharpe ratio for the S&P 500 S&P 500 -22.5% 44% 1.00 M 2 measure for Miranda 0.2216 (0.5568) b. What are the M² measures for Miranda and the S&P 500? (Do not round intermediate calculations. Round your answer to 2 decimal places.) 11.75 %
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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Transcribed Image Text:Kelli Blakely is a portfolio manager for the Miranda Fund, a core large-cap equity fund. The benchmark for performance measurement
purposes is the S&P 500. Although the Miranda portfolio generally mirrors the asset class and sector weightings of the S&P, Blakely is
allowed a significant amount of leeway in managing the fund.
Blakely was able to produce exceptional returns last year (as outlined in the table below) through her market timing and security
selection skills. At the outset of the year, she became extremely concerned that the combination of a weak economy and geopolitical
uncertainties would negatively impact the market. Taking a bold step, she changed her market allocation. For the entire year her asset
class exposures averaged 50% in stocks and 50% in cash. The S&P's allocation between stocks and cash during the period was a
constant 97% and 3%, respectively. The risk-free rate of return was 2%.
One-Year Trailing Returns
Miranda
Fund
10.2%
37%
Return
Standard deviation
Betal
Sharpe ratio for the Miranda Fund
Sharpe ratio for the S&P 500
1.10
Required:
a. What are the Sharpe ratios for the Miranda Fund and the S&P 500? (Do not round intermediate calculations. Negative amount
should be indicated by a minus sign. Round your answers to 4 decimal places.)
S&P 500
-22.5%
44%
1.00
M 2 measure for Miranda
0.2216✔
(0.5568)✔
b. What are the M² measures for Miranda and the S&P 500? (Do not round intermediate calculations. Round your answer to 2
decimal places.)
11.75 X %
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