Based on current dividend yields and expected capital gains, the expected rates of return on portfolios A and B are 9.1% and 12.1%, respectively. The beta of A is .7, while that of B is 1.7. The T-bill rate is currently 5%, while the expected rate of return of the S&P 500 index is 10%. The standard deviation of portfolio A is 27% annually, while that of B is 48%, and that of the index is 37% Think about what are the appropriate performance measures to use in question a and b and why a. If you currently hold a market index portfolio, what would be the alpha for Portfolios A and B? (Negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer as a percentage rounded to 1 decimal place.) Alpha Portfolio A Portfolio B b-1. If instead you could invest only in bills and one of these portfolios, calculate the sharpe measure for Portfolios A and B. (Enter your answer as a decimal rounded to 2 decimal places.) Sharpe Measure Portfolio A Portfolio B Consider the following information regarding the performance of a money manager in a recent month. The table presents the actual return of each sector of the manager's portfolio in column (1), the fraction of the portfolio allocated to each sector in column (2), the benchmark or neutral sector allocations in column (3), and the returns of sector indexes in column (4) (1) Actual (2) Actual Benchmark (3) (4) Index Return Return 2.8% Weight 0.40 Weight 0.30 3.5% (S&P 500) (Aggregate Bond index) Equity Bonds 1.7 0.40 0.50 2.4 Cash 0.20 1.5 0.20 1.5 a-1. What was the manager's return in the month? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places.) Manager's return a-2. What was her over- or under-performance? (Enter a positive value for over- performance or a negative value (using a minus sign) for under-performance. Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places.) Over-or underperformance IAIL .a:L.: - .. :. --
Based on current dividend yields and expected capital gains, the expected rates of return on portfolios A and B are 9.1% and 12.1%, respectively. The beta of A is .7, while that of B is 1.7. The T-bill rate is currently 5%, while the expected rate of return of the S&P 500 index is 10%. The standard deviation of portfolio A is 27% annually, while that of B is 48%, and that of the index is 37% Think about what are the appropriate performance measures to use in question a and b and why a. If you currently hold a market index portfolio, what would be the alpha for Portfolios A and B? (Negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer as a percentage rounded to 1 decimal place.) Alpha Portfolio A Portfolio B b-1. If instead you could invest only in bills and one of these portfolios, calculate the sharpe measure for Portfolios A and B. (Enter your answer as a decimal rounded to 2 decimal places.) Sharpe Measure Portfolio A Portfolio B Consider the following information regarding the performance of a money manager in a recent month. The table presents the actual return of each sector of the manager's portfolio in column (1), the fraction of the portfolio allocated to each sector in column (2), the benchmark or neutral sector allocations in column (3), and the returns of sector indexes in column (4) (1) Actual (2) Actual Benchmark (3) (4) Index Return Return 2.8% Weight 0.40 Weight 0.30 3.5% (S&P 500) (Aggregate Bond index) Equity Bonds 1.7 0.40 0.50 2.4 Cash 0.20 1.5 0.20 1.5 a-1. What was the manager's return in the month? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places.) Manager's return a-2. What was her over- or under-performance? (Enter a positive value for over- performance or a negative value (using a minus sign) for under-performance. Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places.) Over-or underperformance IAIL .a:L.: - .. :. --
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
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Transcribed Image Text:Based on current dividend yields and expected capital gains, the expected rates of
return on portfolios A and B are 9.1% and 12.1%, respectively. The beta of A is .7, while that
of B is 1.7. The T-bill rate is currently 5%, while the expected rate of return of the S&P 500
index is 10%. The standard deviation of portfolio A is 27% annually, while that of B is 48%,
and that of the index is 37%
Think about what are the appropriate performance measures to use in question a and b
and why
a. If you currently hold a market index portfolio, what would be the alpha for Portfolios
A and B? (Negative value should be indicated by a minus sign. Do not round
intermediate calculations. Enter your answer as a percentage rounded to 1
decimal place.)
Alpha
Portfolio A
Portfolio B
b-1. If instead you could invest only in bills and one of these portfolios, calculate the
sharpe measure for Portfolios A and B. (Enter your answer as a decimal rounded to
2 decimal places.)
Sharpe Measure
Portfolio A
Portfolio B
Transcribed Image Text:Consider the following information regarding the performance of a money manager in a
recent month. The table presents the actual return of each sector of the manager's
portfolio in column (1), the fraction of the portfolio allocated to each sector in column (2),
the benchmark or neutral sector allocations in column (3), and the returns of sector
indexes in column (4)
(1)
Actual
(2)
Actual Benchmark
(3)
(4)
Index
Return
Return
2.8%
Weight
0.40
Weight
0.30
3.5% (S&P 500)
(Aggregate Bond
index)
Equity
Bonds
1.7
0.40
0.50
2.4
Cash
0.20
1.5
0.20
1.5
a-1. What was the manager's return in the month? (Do not round intermediate
calculations.
Enter your answer as a percentage rounded to 2 decimal places.)
Manager's return
a-2. What was her over- or under-performance? (Enter a positive value for over-
performance or a negative value (using a minus sign) for under-performance. Do
not round intermediate calculations. Enter your answer as a percentage rounded
to 2 decimal places.)
Over-or underperformance
IAIL
.a:L.: - ..
:.
--
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