The returns to a portfolio over the last 7 years are:YearPortfolio Returns13%22%33%12%454%1768%10%The risk-free rate is 2.26% per year. Calculate the Sortino ratio. Note, this question asks forthe Sortino and not the Sharpe ratio. Enter your answer as a number rather than apercentage. That is, if your answer is 0.92, then enter 0.92 rather than 92%.

To calculate the Sortino ratio, we need to follow these steps:1. Calculate the average return of the…

Answered: The returns to a portfolio over the…

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 are given the following partial covariance and correlation tables from historical data: Securities J K Market Securities J K Market 1.24 1.11 1.17 1.03 Covariance Matrix K 0.90 J 0.0020480 0.0021600 Also, you have estimated that the market's standard deviation is 4.3 percent. For the coming year, the expected return on the market is 14.0 percent and the risk-free rate is expected to be 4.0 percent. Given this information, determine the beta for Security K for the coming year, assuming CAPM is the correct model for required returns. Correlation Matrix K 0.60 1.00 0.90 1.00 0.60 0.80 Market 0.0020480 0.0021600 Market 0.80 0.90 1.00 Ston sharing Hidel lines We
This question requires you to consider a three-asset portfolio valued at 10 million AUD. The portfolio consists of the following assets: AMP, Commonwealth Bank (CBA) and QBE. The variance covariance matrix of 5 day continuously compounded returns is equal to (a) Define the Value at Risk (VAR) for a portfolio. (b) Assuming portfolio weights of AMP (40%), CBA (30%), QBE (30%), calculate the 99 % 5 day relative VaR estimate (employ a z score measured to 2 decimal places) (c) Calculate the VaR diversification benefit of the portfolio.
You are constructing a portfolio of two assets, Asset A and Asset B. The expected returns of the assets are 12 percent and 16 percent. respectively. The standard deviations of the assets are 29 percent and 37 percent, respectively. The correlation between the two assets is 41 and the risk-free rate is 3.4 percent. What is the optimal Sharpe ratio in a portfolio of the two assets? What is the smallest expected loss for this portfolio over the coming year with a probability of 2.5 percent? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Round your Sharpe ratio answer to 4 decimal places and the z-score value to 3 decimal places when calculating your answer. Enter your smallest expected loss as a percent rounded to 2 decimal places.) Sharpe ratio Smallest expected loss %
Consider the following historical performance data for two different portfolios, the Standard and Poor's 500, and the 90-day T-bill presented below. What is the Fama diversification measure for the Globex Fund? Assume the T-bill rate as the risk- free rate and the S&P return as the market average return. Use at least four decimal places in your calculations, but report your answer in percentage terms rounded to two decimal places. (Ex..12345 should be entered as "12.35") Investment Vehicle Globex Fund World Fund S&P500 90-day T-bill Answer: Average Rate of Return% 25.2 13.92 15.52 7.10 Standard Deviation 21.33 14 12.8 0.3 Beta 1.05 0.95 R² 0.756 0.741
Use the data below to answer the following question. If you have a risk-aversion factor of 2.5 and the risk-free rate is 2%, you would invest _______% of your money in the risky portfolio. Year Return 2014 -15% 2015 -5% 2016 30% 2017 -10% 2018 35%
A manager's portfolio generated a return of 11.3% over the past year. The portfolio's beta was 1.16 and the return standard deviation was 15.7%. The market return was 9.8%, its return standard deviation was 13.4%, and the risk-free rate was 3.7%. What are the portfolio's Sharpe ratio, Treynor ratio, and Jensen's alpha?
State the return rate (in %) for your optimal portfolio.
Dog
the CAPM world, the average investor’s risk aversion parameter is 2 and the standard deviation of the market portfolio is 23%. The risk-free rate is 3.5%. What is the expected return on the market portfolio?
This section asks you to calculate prices for various options. In all cases, consider a rate r = 7.97% per year. Estimate the volatility of returns using the estimator: 1 n-1 σ²≈ T-t i=0 Si+1 log. Sti 2 The term of each option will be T = 182/360 (half a year). Determine a reasonable strike K, which is at similar levels to the price series you have downloaded. An option is a derivative instrument that gives its holder the right to buy or sell an underlying asset at a pre-agreed price K at a future date T. If this right can only be exercised in time T, we say that the option is of the European type. If it can be exercised at T or at any time prior to T, then we say that the option is American. Likewise, if the option grants the right to buy, we say that the option is Call type, if it grants the right to sell then the option is Puttype. These types of options are the simplest and are known as European vanilla options. In this case, if T is the expiration date of the contract, and St is…
Chee Chew's portfolio has a beta of 1.25 and earned a return of 13.6% during the year just ended. The risk-free rate is currently 3.9%. The return on the market portfolio during the year just ended was 10.7%. a. Calculate Jensen's measure (Jensen's alpha) for Chee's portfolio for the year just ended. b. Compare the performance of Chee's portfolio found in part a to that of Carri Uhl's portfolio, which has a Jensen's measure of -0.19. Which portfolio performed better? Explain. c. Use your findings in part a to discuss the performance of Chee's portfolio during the period just ended. a. The Jensen's measure (Jensen's alpha) for Chee's portfolio is (Round to two decimal places.) (…)
The following represents the probability distribution for the rates of return for next month: Probability 1/6 2/6 2/6 1/6 Portfolio Market M P (%) (%) -20 -5 -5 +5 +10 0 +50 +10 What is the market beta of P?

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