INVESTMENTS-CONNECT PLUS ACCESS
11th Edition
ISBN: 2810022611546
Author: Bodie
Publisher: MCG
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Chapter 9, Problem 23PS
A.
Summary Introduction
To determine: Justification required in the investment in the suggested fund and the funds alpha.
Introduction
Alpha is a proportion of the dynamic profit for an investment, the performance of that investment when compared to an appropriate market index. It is expressed as the difference among actual expected return and expected rate for an investment.
B.
Summary Introduction
To determine The passive portfolio that comprised the market index portfolio and
Introduction
A passive portfolio system centers on boosting the diversification with little expectational input. A passive portfolio subsidizes basically reflects a market index.The passive portfolio aims to produce a return that is equivalent to the chosen index instead of outperforming it.
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You have been given the following return information for a mutual fund, the market index, and the risk-free rate. You also know that the
return correlation between the fund and the market is 0.97.
Year
2018
2019
2020
2021
2022
Fund
-14.85%
25.1
12.9
7.2
-1.5
Market
-29.5%
20.0
10.9
8.0
-3.2
Risk-Free
3%
5
2
5
What are the Sharpe and Treynor ratios for the fund?
Note: Do not round intermediate calculations. Round your answers to 4 decimal places.
Answer is complete but not entirely correct.
Sharpe ratio
Treynor ratio
0.1613
2.8377
You have been given the following return information for a mutual fund, the market index, and the risk-free rate. You also know that the
return correlation between the fund and the market is 0.97.
Year
2018
2019
2020
2021
2022
Fund
-20.6%
Sharpe ratio
Treynor ratio
25.1
13.9
7.6
-2.1
Market
-39.5%
21.0
13.9
8.8
-5.2
Risk-Free
1%
3
2
4
2
What are the Sharpe and Treynor ratios for the fund?
Note: Do not round intermediate calculations. Round your answers to 4 decimal places.
You want to allocate your money between the risk free asset (0.015), a fixed income fund ( E(B)=0.079, Volatility(B)=0.11), and a diversified stock fund ( E(S)=0.116, Volatility(S)=0.18). The correlation between the two risky funds is 0.57. When creating the optimal risky portfolio, how much weight in decimals should you invest in the diversified stock fund?
Chapter 9 Solutions
INVESTMENTS-CONNECT PLUS ACCESS
Ch. 9 - Prob. 1PSCh. 9 - Prob. 2PSCh. 9 - Prob. 3PSCh. 9 - Prob. 4PSCh. 9 - Prob. 5PSCh. 9 - Prob. 6PSCh. 9 - Prob. 7PSCh. 9 - Prob. 8PSCh. 9 - Prob. 9PSCh. 9 - Prob. 10PS
Ch. 9 - Prob. 11PSCh. 9 - Prob. 12PSCh. 9 - Prob. 13PSCh. 9 - Prob. 14PSCh. 9 - Prob. 15PSCh. 9 - Prob. 16PSCh. 9 - Prob. 17PSCh. 9 - Prob. 18PSCh. 9 - Prob. 19PSCh. 9 - Prob. 20PSCh. 9 - Prob. 21PSCh. 9 - Prob. 22PSCh. 9 - Prob. 23PSCh. 9 - Prob. 24PSCh. 9 - Prob. 1CPCh. 9 - Prob. 2CPCh. 9 - Prob. 3CPCh. 9 - Prob. 4CPCh. 9 - Prob. 5CPCh. 9 - Prob. 6CPCh. 9 - Prob. 7CPCh. 9 - Prob. 8CPCh. 9 - Prob. 9CPCh. 9 - Prob. 10CPCh. 9 - Prob. 11CPCh. 9 - Prob. 12CP
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