INVESTMENTS(LL)W/CONNECT
11th Edition
ISBN: 9781260433920
Author: Bodie
Publisher: McGraw-Hill Publishing Co.
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Chapter 9, Problem 8CP
Summary Introduction
To determine: Choose the correct option for the portfolio R lies on the preceding table
Introduction: The
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Consider the following performance data for a portfolio manager:
Benchmark
Portfolio
Index
Portfolio
Weight
Weight
Return
Return
Stocks
0.65
0.7
0.11
0.12
Bonds
0.3
0.25
0.07
0.08
Cash
0.05
0.05
0.03
0.025
a.Calculate the percentage return that can be attributed to the asset allocation decision.
b.Calculate the percentage return that can be attributed to the security selection decision.
Which of the following statements regarding the graph of the SML is most accurate?
A Select one
OA. The beta of Portfolios A, B, and C are identical as they fall directly on the line.
B. The expected return of Portfolio C is the difference between the market's expected return and the risk-free rate.
C. Portfolio A has lower systematic risk than Portfolio B.
D. The slope of the line is the market risk premium.
It is a risk adjusted performance measure that represents the average return on a portfolio.
a. sharpe ratio
b. Treynor index
Chapter 9 Solutions
INVESTMENTS(LL)W/CONNECT
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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- Standard deviation of portfolio returns is a measure of ___________. Group of answer choices total risk systematic risk market risk firm-specific risk unsystematic riskarrow_forwarduse attachments to answer question This question relates to Diagrams 6 - 9 from the 9.2 diagrams, each of which shows a set of portfolios plotted on a set of risk/return axes. Which diagram shows (in red) the set of efficient portfolios in the presence of a risk-free asset? Select one: a. Diagram 6 b. Diagram 7 c. Diagram 8 d. Diagram 9arrow_forwardUse attachments to answer questions This question relates to Diagrams 1 - 4 from the diagrams attached , each of which shows a set of portfolios plotted on a set of risk/return axes. Which diagram shows (in red) the set of feasible portfolios? Select one: a. Diagram 1 b. Diagram 2 c. Diagram 3 d. Diagram 4arrow_forward
- Which of the following measures reflects the excess return earned on a portfolio per unit of its systematic risk a. Treynor’s measure b. Sharpe’s measure c. Jensen’s measure d. Total measurearrow_forwardThe following data are available for two assets A and B: E(rA) = 13% E(rB) = 15% s(rA) = 22% s(rB) = 24% rA,B = 0 Let WA and WB denote the proportions of funds invested in assets A and B such that WA + WB=1. If portfolio has to be a minimum risk portfolio, find the weights.arrow_forwardQuestion 1 Fill the parts in the above table that are shaded in yellow. You will notice that there are nineline items. Question 2Using the data generated in the previous question (Question 1);a) Plot the Security Market Line (SML) b) Superimpose the CAPM’s required return on the SML c) Indicate which investments will plot on, above and below the SML? d) If an investment’s expected return (mean return) does not plot on the SML, what doesit show? Identify undervalued/overvalued investments from the grapharrow_forward
- Consider two portfolios, Portfolio A and Portfolio B, with the following performance metrics: - Portfolio A has a Sharpe Ratio of 0.8, a Treynor Ratio of 1.2, and a Jensen's Alpha of 0.5. - Portfolio B has a Sharpe Ratio of 1.2, a Treynor Ratio of 0.9, and a Jensen's Alpha of -0.2. Which of the following statements is correct regarding the performance of these portfolios? Portfolio A has a higher risk-adjusted return when the risk is measured by the beta. Portfolio B outperforms the risk-adjusted return suggested by CAPM. Portfolio A and B have similar risk-adjusted returns, but Portfolio B exhibits negative abnormal returns. Portfolio B has a higher risk-adjusted return when the risk is measured by the standard deviation. Portfolio A outperforms Portfolio B in terms of both risk-adjusted return and abnormal returns suggested by CAPM.arrow_forwardUsing the data generated in the graph, show what the information looks like in a spreadsheet. a) Plot the Security Market Line (SML) b) Superimpose the CAPM’s required return on the SML c) Indicate which investments will plot on, above, and below the SML? d) If an investment’s expected return (mean return) does not plot on the SML, what does it show? Identify undervalued/overvalued investments from the graph.arrow_forward28) A manager who evaluates portfolios' investment performance adjusted for market risk is most likely to rank portfolios based on their: Select one or more: Sharpe ratio Treynor measure Jensen's Alpha measure M-squared measuresarrow_forward
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