free return during the sample period was 5%. Average return. Standard deviation of returns. Beta Residual standard deviation Guardian 14% 26% Information ratio 1.2 4% Market Portfolio 10% 21% 1 0% Calculate the information ratio measure of performance for Guardian Stock Fund. (Round your answer to 2 decimal places. D round intermediate calculations.)
free return during the sample period was 5%. Average return. Standard deviation of returns. Beta Residual standard deviation Guardian 14% 26% Information ratio 1.2 4% Market Portfolio 10% 21% 1 0% Calculate the information ratio measure of performance for Guardian Stock Fund. (Round your answer to 2 decimal places. D round intermediate calculations.)
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
Related questions
Concept explainers
Risk and return
Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.
Capital Asset Pricing Model
Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
Question
![### Performance Analysis of Guardian Stock Fund and Market Portfolio
**Task**: Use the following data to analyze the performance of Guardian Stock Fund and the market portfolio. The risk-free return during the sample period was 5%.
| | **Guardian** | **Market Portfolio** |
|--------------------|--------------|----------------------|
| **Average return** | 14% | 10% |
| **Standard deviation of returns** | 26% | 21% |
| **Beta** | 1.2 | 1 |
| **Residual standard deviation** | 4% | 0%
**Question**: Calculate the information ratio measure of performance for Guardian Stock Fund.
**Instruction**: Round your answer to 2 decimal places. Do not round intermediate calculations.
**Information ratio box**:
```
Information ratio: [ ]
```
**Detailed Analysis**:
- The table provides key performance metrics for both the Guardian Stock Fund and the market portfolio, including average returns, standard deviations, betas, and residual standard deviations.
- The instruction is to calculate the information ratio for the Guardian Stock Fund using the given performance data.
This information is intended to help in understanding and analyzing financial performance metrics and their implications for investment decisions.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff1fd60a6-e122-44a6-b63f-53f11d7f8fb8%2F82e80cb4-755d-4c58-bdd1-ed8c298c8064%2F1npw548_processed.png&w=3840&q=75)
Transcribed Image Text:### Performance Analysis of Guardian Stock Fund and Market Portfolio
**Task**: Use the following data to analyze the performance of Guardian Stock Fund and the market portfolio. The risk-free return during the sample period was 5%.
| | **Guardian** | **Market Portfolio** |
|--------------------|--------------|----------------------|
| **Average return** | 14% | 10% |
| **Standard deviation of returns** | 26% | 21% |
| **Beta** | 1.2 | 1 |
| **Residual standard deviation** | 4% | 0%
**Question**: Calculate the information ratio measure of performance for Guardian Stock Fund.
**Instruction**: Round your answer to 2 decimal places. Do not round intermediate calculations.
**Information ratio box**:
```
Information ratio: [ ]
```
**Detailed Analysis**:
- The table provides key performance metrics for both the Guardian Stock Fund and the market portfolio, including average returns, standard deviations, betas, and residual standard deviations.
- The instruction is to calculate the information ratio for the Guardian Stock Fund using the given performance data.
This information is intended to help in understanding and analyzing financial performance metrics and their implications for investment decisions.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 2 images
Follow-up Questions
Read through expert solutions to related follow-up questions below.
Follow-up Question
Transcribed Image Text:Use the following data to answer the question regarding the performance of Guardian Stock Fund and the market portfolio. The risk-
free return during the sample period was 5%.
Average return
Standard deviation of returns
Beta
Residual standard deviation
Guardian
14%
26%
1.2
0.60 X
4%
Calculate the information ratio measure of performance for Guardian Stock Fund. (Round your answer to 2 decimal places. Do not
round intermediate calculations.)
Answer is complete but not entirely correct.
Information
ratio
Market Portfolio
10%
21%
1
0%
Solution
by Bartleby ExpertKnowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education