The value of alpha, information ratio, Sharpe ratio, and Treynor measure for stocks with the given information. Introduction: The value of alpha is depending upon the standard deviation, return value and excess return value. Information ratio is ratio of alpha and residual standard deviation.

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Answer 1

Question

Chapter 24, Problem 9PS

A

Summary Introduction

To calculate: The value of alpha, information ratio, Sharpe ratio, and Treynor measure for stocks with the given information.

Introduction: The value of alpha is depending upon the standard deviation, return value and excess return value. Information ratio is ratio of alpha and residual standard deviation.

B

Summary Introduction

To explain: The choice to be made of best stock in different given circumstances.

Introduction: Compare all the values of different parameters we find that stock ‘A’ has high Sharpe ratio and stock ‘B’ has high alpha value and treynor ratio.

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When working with the CAPM, which of the following factors can be determined with the most precision? a. The beta coefficient of "the market," which is the same as the beta of an average stock. b. The beta coefficient, bi, of a relatively safe stock. c. The market risk premium (RPM). d. The most appropriate risk-free rate, rRF. e. The expected rate of return on the market, rM.

When working with the CAPM, which of the following factors can be determined with the most precision? a. The most appropriate risk-free rate, rRF. b. The market risk premium (RPM). c. The beta coefficient, bi, of a relatively safe stock. d. The expected rate of return on the market, rM. e. The beta coefficient of "the market," which is the same as the beta of an average stock.

Assume you wish to evaluate the risk and return behaviors associated with various combinations of two stocks, Alpha Software and Beta Electronics, under three possible degrees of correlation: perfect positive, uncorrelated, and perfect negative. The average return and standard deviation for each stock appears here: a. If the returns of assets Alpha and Beta are perfectly positively correlated (correlation coefficient = + 1), over what range would the average return on portfolios of these stocks vary? In other words, what is the highest and lowest average return that different combinations of these stocks could achieve? What is the minimum and maximum standard deviation that portfolios Alpha and Beta could achieve? b. If the returns of assets Alpha and Beta are uncorrelated (correlation coefficient = 0), over what range would the average return on portfolios of these stocks vary? What is the standard deviation of a portfolio that invests 75% in Alpha and 25% in Beta? How does this…

Answer 2

Question

Chapter 24, Problem 9PS

A

Summary Introduction

To calculate: The value of alpha, information ratio, Sharpe ratio, and Treynor measure for stocks with the given information.

Introduction: The value of alpha is depending upon the standard deviation, return value and excess return value. Information ratio is ratio of alpha and residual standard deviation.

B

Summary Introduction

To explain: The choice to be made of best stock in different given circumstances.

Introduction: Compare all the values of different parameters we find that stock ‘A’ has high Sharpe ratio and stock ‘B’ has high alpha value and treynor ratio.

Expert Solution & Answer

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Check out a sample textbook solution

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Answer 3

Question

Chapter 24, Problem 9PS

A

Summary Introduction

To calculate: The value of alpha, information ratio, Sharpe ratio, and Treynor measure for stocks with the given information.

Introduction: The value of alpha is depending upon the standard deviation, return value and excess return value. Information ratio is ratio of alpha and residual standard deviation.

B

Summary Introduction

To explain: The choice to be made of best stock in different given circumstances.

Introduction: Compare all the values of different parameters we find that stock ‘A’ has high Sharpe ratio and stock ‘B’ has high alpha value and treynor ratio.

Expert Solution & Answer

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Check out a sample textbook solution

See solution

Answer 4

Question

Chapter 24, Problem 9PS

A

Summary Introduction

To calculate: The value of alpha, information ratio, Sharpe ratio, and Treynor measure for stocks with the given information.

Introduction: The value of alpha is depending upon the standard deviation, return value and excess return value. Information ratio is ratio of alpha and residual standard deviation.

B

Summary Introduction

To explain: The choice to be made of best stock in different given circumstances.

Introduction: Compare all the values of different parameters we find that stock ‘A’ has high Sharpe ratio and stock ‘B’ has high alpha value and treynor ratio.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 5

Chapter 24, Problem 9PS

A

Summary Introduction

To calculate: The value of alpha, information ratio, Sharpe ratio, and Treynor measure for stocks with the given information.

Introduction: The value of alpha is depending upon the standard deviation, return value and excess return value. Information ratio is ratio of alpha and residual standard deviation.

B

Summary Introduction

To explain: The choice to be made of best stock in different given circumstances.

Introduction: Compare all the values of different parameters we find that stock ‘A’ has high Sharpe ratio and stock ‘B’ has high alpha value and treynor ratio.

Answer 6

Chapter 24, Problem 9PS

A

Summary Introduction

To calculate: The value of alpha, information ratio, Sharpe ratio, and Treynor measure for stocks with the given information.

Introduction: The value of alpha is depending upon the standard deviation, return value and excess return value. Information ratio is ratio of alpha and residual standard deviation.

Answer 7

Chapter 24, Problem 9PS

A

Summary Introduction

To calculate: The value of alpha, information ratio, Sharpe ratio, and Treynor measure for stocks with the given information.

Introduction: The value of alpha is depending upon the standard deviation, return value and excess return value. Information ratio is ratio of alpha and residual standard deviation.

Answer 8

B

Summary Introduction

To explain: The choice to be made of best stock in different given circumstances.

Introduction: Compare all the values of different parameters we find that stock ‘A’ has high Sharpe ratio and stock ‘B’ has high alpha value and treynor ratio.

Answer 9

B

Summary Introduction

To explain: The choice to be made of best stock in different given circumstances.

Introduction: Compare all the values of different parameters we find that stock ‘A’ has high Sharpe ratio and stock ‘B’ has high alpha value and treynor ratio.

Answer 10

Expert Solution & Answer

Answer 11

Expert Solution & Answer

Answer 12

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Answer 13

Ch. 24 - Prob. 1PS Ch. 24 - Prob. 2PS Ch. 24 - Prob. 3PS Ch. 24 - Prob. 4PS Ch. 24 - Prob. 5PS Ch. 24 - Prob. 6PS Ch. 24 - Prob. 7PS Ch. 24 - Prob. 8PS Ch. 24 - Prob. 9PS Ch. 24 - Prob. 10PS

The value of alpha, information ratio, Sharpe ratio, and Treynor measure for stocks with the given information. Introduction: The value of alpha is depending upon the standard deviation, return value and excess return value. Information ratio is ratio of alpha and residual standard deviation.

Videos

To explain: The choice to be made of best stock in different given circumstances.

Introduction: Compare all the values of different parameters we find that stock ‘A’ has high Sharpe ratio and stock ‘B’ has high alpha value and treynor ratio.

Want to see the full answer?

Chapter 24 Solutions

The value of alpha, information ratio, Sharpe ratio, and Treynor measure for stocks with the given information. Introduction: The value of alpha is depending upon the standard deviation, return value and excess return value. Information ratio is ratio of alpha and residual standard deviation.

Videos

To explain: The choice to be made of best stock in different given circumstances. Introduction: Compare all the values of different parameters we find that stock ‘A’ has high Sharpe ratio and stock ‘B’ has high alpha value and treynor ratio.

Want to see the full answer?

Chapter 24 Solutions

To explain: The choice to be made of best stock in different given circumstances.

Introduction: Compare all the values of different parameters we find that stock ‘A’ has high Sharpe ratio and stock ‘B’ has high alpha value and treynor ratio.