FOUNDATIONS OF FINANCE-MYFINANCELAB
FOUNDATIONS OF FINANCE-MYFINANCELAB
10th Edition
ISBN: 9780135160619
Author: KEOWN
Publisher: PEARSON
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Chapter 16, Problem 3RQ

What is meant by arbitrage profits?

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Congratulations! Your portfolio returned 16.7% last year, 2.5% better than the market return of 14.2%. Your portfolio had a standard deviation of earnings equal to 18%, and the risk-free rate is equal to 4.4%. Calculate Sharpe's measure for your portfolio. If the market's Sharpe's measure is 0.29, did you do better or worse than the market from a risk/return perspective? The Sharpe's measure of your portfolio is (Round to two decimal places.)
On January 1, 2020, Simon Love's portfolio of 15 common stocks had a market value of $258,000. At the end of May 2020, Simon sold one of the stocks, which had a beginning-of-year value of $26,900, for $31,400. He did not reinvest those or any other funds in the portfolio during the year. He received total dividends from stocks in his portfolio of $11,900 during the year. On December 31, 2020, Simon's portfolio had a market value of $246,000. Find the HPR on Simon's portfolio during the year ended December 31, 2020. (Measure the amount of withdrawn funds at their beginning-of-year value.) Simon's portfolio HPR during the year ended December 31, 2020, is %. (Round to two decimal places.)
Chee Chew's portfolio has a beta of 1.27 and earned a return of 13.6% during the year just ended. The risk-free rate is currently 4.6%. The return on the market portfolio during the year just ended was 10.5%. 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 -0.25. 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.

Chapter 16 Solutions

FOUNDATIONS OF FINANCE-MYFINANCELAB

Ch. 16 - Prob. 1RQCh. 16 - Prob. 2RQCh. 16 - What is meant by arbitrage profits?Ch. 16 - Prob. 4RQCh. 16 - Prob. 5RQCh. 16 - Prob. 6RQCh. 16 - Prob. 7RQCh. 16 - Prob. 8RQCh. 16 - Prob. 9RQCh. 16 - Prob. 1SP
Ch. 16 - Prob. 2SPCh. 16 - Prob. 3SPCh. 16 - Prob. 4SPCh. 16 - (Exchange rate arbitrage) You own 10,000. The...Ch. 16 - Prob. 6SPCh. 16 - Prob. 7SPCh. 16 - Prob. 8SPCh. 16 - Prob. 9SPCh. 16 - Prob. 10SPCh. 16 - Prob. 11SPCh. 16 - (Purchasing-power parity) Lets assume a McDonalds...Ch. 16 - Prob. 1MCCh. 16 - Prob. 2MCCh. 16 - Prob. 3MCCh. 16 - d. What are the differences among a forward...Ch. 16 - Prob. 5MCCh. 16 - Prob. 6MCCh. 16 - Selling Quotes for Foreign Currencies in New York...Ch. 16 - Prob. 8MCCh. 16 - Prob. 9MC
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