The risk-free rate is 3%. What is the average (total not excess) return on the benchmark implied by the three-factor model for each manager? (a) Manager 1: 24%, Manager 2: 13% (b) Manager 1: 24%, Manager 2: 12% (c) Manager 1: 26%, Manager 2: 12% (d) Manager 1: 27%, Manager 2: 13% (e) None of the above 4. Based on the Fama French 3-factor model and the data in 3, which manager is better? (a) Manager 1 did better (b) Manager 2 did better (c) Their performance was equally good (d) Not enough information 5. Based on the exposures to the Fama-French factors in problem 3, what kinds of stocks does manager 2 invest in? (a) Small-cap value stocks (b) Small-cap growth stocks (c) Large-cap growth stocks (d) Large-cap value stocks (e) Not enough information

The risk-free rate is 3%. What is the average (total not excess) return on the benchmark implied by the three-factor model for each manager? (a) Manager 1: 24%, Manager 2: 13% (b) Manager 1: 24%, Manager 2: 12% (c) Manager 1: 26%, Manager 2: 12% (d) Manager 1: 27%, Manager 2: 13% (e) None of the above 4. Based on the Fama French 3-factor model and the data in 3, which manager is better? (a) Manager 1 did better (b) Manager 2 did better (c) Their performance was equally good (d) Not enough information 5. Based on the exposures to the Fama-French factors in problem 3, what kinds of stocks does manager 2 invest in? (a) Small-cap value stocks (b) Small-cap growth stocks (c) Large-cap growth stocks (d) Large-cap value stocks (e) Not enough information

Essentials of Business Analytics (MindTap Course List)

2nd Edition

ISBN:9781305627734

Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Publisher:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Chapter15: Decision Analysis

Section: Chapter Questions

Problem 13P: The following profit payoff table was presented in Problem 1: The probabilities for the states of...

See similar textbooks

Similar questions

The following profit payoff table was presented in Problem 1: The probabilities for the states of nature are P(s1) = 0.65, P(s2) = 0.15, and P(s3) = 0.20. What is the optimal decision strategy if perfect information were available? What is the expected value for the decision strategy developed in part (a)? Using the expected value approach, what is the recommended decision without perfect information? What is its expected value? What is the expected value of perfect information?
Answer question in the image.
Consider the following investments: Investment Expected return Standard deviationA 5% 10%B 7% 11%C 6% 12%D 6% 10% Which would you prefer between the following pairs:a) A and Db) B and Cc) C and D
Two projects, A and B, are analyzed using ranking present worth analysis with MARR at i%. It is found that PW(A) > PW(B). If MARR is changed to (i + 1)%, what will be the relationship between PW(A) and PW(B)? a. PW(A) > PW(B) b. PW(A) = PW(B) c. PW(A) < PW(B) d. Cannot be determined without the cash flow profiles.
4. Explain what the Capital Asset Pricing Model (CAPM) is and calculate and explain the result of the CAPM based on the following data. a. Expected Return: 8% b. Risk-free rate: 4% c. Beta of the investment: 1.2 ER=Rf+B(ERm - Rf) where: ER = expected return of investment Rf risk-free rate B;= beta of the investment - (ERm - Rf) = market risk premium
Refer to the following payoff table (values are profit): State of Nature Alternative S1 S2 A1 75 −40 A2 0 100 Prior Probability 0.6 0.4 What is the expected payoff of the decision strategy (i.e. using the EMV/EP criterion)?
The expected value, standard deviation of returns, and coefficient o below.) \table[[Asset A],[Possible Outcomes,Probability,Returns (%)
6. On the basis of the utility formula below, which investment would you select if you were risk averse with A = 4? Standard Expected return E(t) deviation Investment 0.12 0.30 0.15 0.50 0.21 0.16 0.24 0.21
An investment has been found to have two different IRRs, one at 14% and the other at 20%. When a required return of 17% is used, the NPV of the investment is negative. Knowing this: a. What range of required returns will generate a negative NPV? b. What range of required returns will generate a positive NPV?
a. Using the data in the table below alculate the following performance measures.i. Sharpe ratioii. Treynor measureiii. Jensen’s alphaiv. M-squared measurev. T-squared measure, andvi. Appraisal ratio (information ratio) Fund Average return Standard Deviation Beta coefficient Unsystematic Risk A 0.240 0.220 0.800 0.017 B 0.200 0.170 0.900 0.450 C 0.290 0.380 1.200 0.074 D 0.260 0.290 1.100 0.026 E 0.180 0.400 0.900 0.121 F 0.320 0.460 1.100 0.153 G 0.250 0.190 0.700 0.120 Market 0.220 0.180 1.000 0.000 Risk free return 0.050 0.000 b. Out of the performance measures you calculated in part a., which one would you use undereach of the following circumstances:i. You want to select one of the funds as your risky portfolio.ii. You want to select one of the funds to be mixed with the rest of your portfolio,currently composed solely of holdings in the market-index fund.iii. You want to select one of the funds to form an actively managed stock portfolio
The market has three risky assets. The variance-covariance matrix of the risky assets are as follows: r1 r2 r3 r1 0.25 0 -0.2 r2 0 4 0.1 r3 -0.2 0.1 1 Assume the market portfolio is M = 0.2 ◦ r1 + 0.5 ◦ r2 + 0.3 ◦ r3. Further assume E(rM) = 0.08. (1) What is the variance of M?(2) What is the covariance of r2 and M?(3) What is β2?(4) If the rate of return of the risk-free asset is 0.02. Then what is the fair expected rate of return of security 2?(5) An investor wants to invest in a portfolio P = 0.4◦r1+0.6◦r3. What is its “fair” expected rate of return?
The standard deviation of return on investment a is 0.10, while the standard deviation of return on investment b is 0.04. If the correlation coefficient between the returns on A and B is_____________. A. -0.0447 B. -0.0020 C. 0.0020 D. 0.0447