Kelli Blakely is a portfolio manager for the Miranda Fund, a core large-cap equity fund. The market proxy and 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. However, her portfolio holds only stocks found in the S&P 500 and cash. 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 geopolitica. uncertainties would negatively impact the market. Taking a bold step, she changed her market allocation. For the entire year her asse 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 S&P 500 Return Standard deviation Beta -22.58 10.28 37 1.10 448 1.00 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 answer to 4 decimal places.) Sharpe ratio for the Miranda Fund Sharpe ratio for the S&P 500 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.) M2 measure for Miranda
Kelli Blakely is a portfolio manager for the Miranda Fund, a core large-cap equity fund. The market proxy and 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. However, her portfolio holds only stocks found in the S&P 500 and cash. 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 geopolitica. uncertainties would negatively impact the market. Taking a bold step, she changed her market allocation. For the entire year her asse 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 S&P 500 Return Standard deviation Beta -22.58 10.28 37 1.10 448 1.00 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 answer to 4 decimal places.) Sharpe ratio for the Miranda Fund Sharpe ratio for the S&P 500 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.) M2 measure for Miranda
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 market proxy and 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. However, her portfolio holds only
stocks found in the S&P 500 and cash.
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
S&P 500
Return
Standard deviation
-22.58
10.28
379
44%
Beta
1.10
1.00
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 answer to 4 decimal places.)
Sharpe ratio for the Miranda Fund
Sharpe ratio for the S&P 500
b. What are the M2 measures for Miranda and the S&P 500? (Do not round intermedilate calculations, Round your answer to 2
decimal places.)
M2 measure for Miranda
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Transcribed Image Text: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.)
Answer is complete and correct.
M2 measure for Miranda
34.25
c. What is the Treynor measure for the Miranda Fund and the S&P 500? (Do not round intermediate calculations. Round
your answer to 4 decimal places.)
Answer is complete but not entirely correct.
Treynor measure for the Miranda Fund
Treynor measure for the S&P 500
0.0745
0.2450
d. What is the Jensen measure for the Miranda Fund? (Do not round intermediate calculations. Round your answer to 2
decimal places.)
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