Compute the annual tracking error from the following information:QuarterPortfolio B's1234O 1.06%O 2.12%O 3.67%O 4.25%O NonePortfolio A'sReturn (%)1.151.891.15-0.47Return (%)1.65-0.100.52-0.60

Variables in the question: QuarterPortfolio A's ReturnPortfolio B's…

Compute the annual tracking error from the following information: Quarter Portfolio A's Portfolio B's 1 2 3 4 O 1.06% O 2.12% O 3.67% O 4.25% None Return (%). 1.15 1.89 1.15 -0.47 Return (%) 1.65 -0.10 0.52 -0.60

Compute the annual tracking error from the following information: Quarter Portfolio A's Portfolio B's 1 2 3 4 O 1.06% O 2.12% O 3.67% O 4.25% None Return (%). 1.15 1.89 1.15 -0.47 Return (%) 1.65 -0.10 0.52 -0.60

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

See similar textbooks

Related questions

Q: a (i) 25% and (ii) 14% b (i) 21% and (ii) 12% c (i) 25% and (ii) 12% d None of the above e (i) 21%…

A: Given, Economic Condition Probability(P) Boom 0.1 Good 0.6 Recession 0.3

Q: Dependent Variable: PORTFOLIO Method: Least Squares Sample: 1991M01 2009M12 Included observations:…

A: The objective of the question is to determine if the given model is statistically significant and to…

Q: Problem 18-7 (Algo) A manager buys three shares of stock today, and then sells one of those shares…

A: The average return of an investment portfolio over a certain time period is determined using the…

Q: 0 0 0 о

A: Hi student Since there are multiple questions, we will answer only first question. Every business…

Q: Multiple Choice O O O -24.34% -12.61% -59.53% -36.07%

A: Mean return=10.85%Standard deviation=23.46%Find out maximum loss for 2.5% probability.

Q: Calculate: - Standard Deviation - Beta - Covariance

A: Risk means possibility that results of uncertain events will be different from the expected results.…

Q: What range of returns should you expect to see with a 99.7 percent probability on an asset that has…

A: Investors and analysts assess the performance of specific assets, portfolios, or whole markets using…

Q: An asset has an average return of 11.15 percent and a standard deviation of 23.91 percent. What is…

A: We make investments in a financial security with the hope of earning a return from the investment.…

Q: Based on the given annual returns, calculate the VAR for portfolios A and B to determine which is…

A: To determine the Value at Risk (VaR) for portfolios A and B and decide which one is optimal based on…

Q: An investor has an investment that has produced the following returns: Year 1: 10%, Year 2: 5%, Year…

A: Arthmetic mean is rate of return that is calculated by summing up all returns and dividing by the…

Q: The series of returns of a single investment are presented as follows; Beginning value 100 115.0…

A: Given: Variables in the question: YearBeginning ValueEnd Value1100.0115.02115.0138.03138.0110.4

Q: Two investments generated the following annual returns: 20X0 20X1 20X2 20X3 20X4 Investment X 13% 17…

A: In the given case , we have given each investment's annual returns. Average annual rate of return =…

Q: For each 1% change in the market portfolio's excess return, the investment's excess return is…

A: Excess return is determined by deducting the return from on investment from the return percentage…

Q: Four assets have the following distribution of returns. Probability…

A: ACCORDING TO THE RULE,WE WILL ANSWER THE FIRST THREE SUBPARTS ONLY. FOR THE REMAINING SUBPARTS,…

Q: Asset 1 Asset 2 Expected return 0.07 0.078 Standard deviation 0.1 0.2 if correlation is 0.4 weight 1…

A: In order to determine the risk and performance of the portfolio investors uses measures such as…

Q: Calculate : M2 measure T2 measure Information Ratio (appraisal ratio) Fund Average return…

A: Since you have posted a question with multiple sub-parts, we will solve first three sub parts for…

Q: What is the risk free return?

A: Rate of return is the return percentage which an investor gets from the money which has been…

Q: An asset has an average return of 11.15 percent and a standard deviation of 22.89 percent. What is…

A: Maximum rate of return depends on the probability of event and standard deviation and mean expected…

Q: The annual risk free rate is 0.03. We have the followin assets (on an annual basis). Expected return…

A: Portfolio sharp ratio is calculated as shown below. Sharp ratio=Portfolio expected return-Risk free…

Q: How would you characterize the correlations of returns of the two assets making up each of the two…

A: Portfolio can be defined as an investment which consists of multiple stocks. The objective of an…

Q: 6. A zero-risk portfolio has a standard deviation of: A. 0% В. 1% C. 100% D. Infinity

A: Answer and calculations are given below

Q: An asset has an average return of 10.79 percent and a standard deviation of 22.71 percent. What is…

A: Maximum rate of return depends on the probability of event and standard deviation and mean expected…

Q: Risk-free rate is 7% 2. Calculate the required rate of return for A. 1. 8.90% 2. 8.40% 3. 8.70% 4.…

A: Required return is sum product of expected return and respective probability. Required return = ∑p*R…

Q: You have the following information: A B C 2% 3% 1.5 0.5 2 Alpha 1% Beta 2 D -2% Market 0% 1 Res.…

A: The performance of the portfolio can measure by using the 3 different methods as Sharpe ratio, the…

Q: F G H Monthly Monthly Еxcess Excess return for Market Stock 1 Returns 0.09 0.03 -0.07 0.01 0.02 0.02…

A: Risk and return are two main components of investment. Beta a measure which shows the degree of risk…

Q: The expected value and the standard deviation of returns for asset A is Asset A Possible Outcomes…

A: Expected value:Possible outcomes Probability (a)Returns % (b)Expected value…

Q: Two investments generated the following annual returns: a. What is the average annual return on each…

A: Annual return The return an investor receives from an investment within one fiscal year is called…

Q: Weight of B: Return of A: Return of B: Standard deviation of A: Standard deviation of B: Coefficient…

A: The objective of the question is to calculate the weight of B, return of A and B, standard deviation…

Q: The following investments and probabilities are presented:…

A: An investor can determine the performance and riskiness of investment by evaluating expected return,…

Q: ired Year 0 1 2 3 4 5 Return Alpha Sum Tracking Error Information Ratio Note: the numbers in red are…

A: Information ratio is calculated as shown below.

Q: State of Economy Probability ABC Company Expected Return Expected Return XYZ Company Very Poor 0.30…

A: Solution : Co-Variance is calculated as follows. Co-Variance : Dx * Dy / N…

Q: An asset has an average return of 10.73 percent and a standard deviation of 20.70 percent. What…

A: Average Return = 10.73%' Standard Deviation = 20.70% 95% Probability range = ?

Q: Please correct answer and don't use hand rating

A: To calculate the expected return and standard deviation of the portfolio, we'll use the following…

Q: Given the following probability distribution, compute for Outcome Probability Expected Return 20%…

A: As information expected return is as follows: Probability Return Expected return A B C=A*B…

Q: Suppose the returns on an asset are normally distributed. The historical average annua return for…

A: Here,HistoricalAverage Annual Return is 5.7%Standard Deviation is 18.3%

Q: Given the following information, compute the standard deviation for Investment A: Payoff…

A: LetX: Pay off then PMF of X is given byxP(x)300.6150.3-120.1Now from the Table we…

Q: You have the following information: A B с Market Alpha 2% 3% 0% Beta 1.5 0.5 1 Res. 2.00% 0.90%…

A: Here,

Q: nsider the historical return data of ABC portfolio as below. 1990 4% 1991 10% 1992 2% 1993 1% 1994…

A: average return =sum of returntotal number of return

Q: Investment Standard Assets Expected return Correlation Beta weight Deviation Asset A 15.00% 30.00%…

A: Portfolio Analysis with Risky Assets and T-BillHere's the breakdown of your portfolio analysis:1.…

Q: You are choosing between the following portfolios. Which one do you choose? Select one: a. ASD b.…

A: The Sharpe ratio is a measure of risk adjusted return of a portfolio. It is calculated by dividing…

Q: der the information for assets A, B, and C below: State Boom Average Bust Probability 0.2 0.4 0.4…

A: Portfolio is the combination of the stocks and return on portfolio depends on the stocks in the…

Q: Date Adj Date TSLA Return AMZN Return MCD Return Risk-Free -3.50% 3.24% -3.63% 0.45% 8/1/23 8/31/23…

A: Excess returns refer to the difference between two return rates. The second rate is usually the…

Question

Compute the annual tracking error from the following information:
Quarter
Portfolio B's
1
2
3
4
O 1.06%
O 2.12%
O 3.67%
O 4.25%
O None
Portfolio A's
Return (%)
1.15
1.89
1.15
-0.47
Return (%)
1.65
-0.10
0.52
-0.60

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1: Determine the variables in the question:

VIEW

Step 2: Computation of annual tracking error:

VIEW

Solution

VIEW

Step by step

Solved in 3 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

onsider the historical return data of ABC portfolio as below. 1990 4% 1991 10% 1992 2% 1993 1% 1994 5% 1995 -1% 1996 7% 1997 -3% 1998 0% 1999 3% What is the sample (empirical) probability that return is greater than or equal to 4%? Why?
N1
1. The expected returns for the two assets are given below: Year Asset F Asset G 2013 16% 17% 2014 17 16 2015 18 15 2016 19 14 A. Calculate the expected return for Asset F along with the standard deviation. B. If 50% of money is invested in Asset F and 50% in Asset G calculate the portfolio return and standard deviation
Based on the given annual returns, calculate the VAR for portfolios A and B to determine which is optimal. Additionally, assume that anything more than a 5% loss is unacceptable. Porfolio A Porfolio B Market T-bills A B Market RF 0.11 0.09 0.14 0.02 -0.04 -0.07 -0.06 0.03 0.13 0.11 0.10 0.03 0.07 0.09 0.05 0.04 0.19 0.16 0.18 0.03 0.09 0.07 0.10 0.03
Please Solve In 15mins I will Thumbs-up
Data are given as follows: (all the values are in percent) Month Average portfolio return market Average Average risk-free return rate 2.464 3.360 0.090 16.130 2.348 0.090 0.771 -1.484 0.120 -6.386 -2.437 0.120 15 -2.861 1.965 0.090 16 -7.673 2.806 0.120 0.805 -5.721 0.150 -0.372 0.327 0.150 1.508 2.464 0.150 10 2.003 2.250 0.150 11 -4.723 6.639 0.210 12 Calculate Treynor measure, Sharpe ratio, tracking error, information ratio, and hit ratio. Then, evaluate the performance of this portfolio. 2.383 4.874 0.210
Consider the case of two financial assets and three market conditions (states). The tablebelow gives the respective probability for each market condition and the return of each assetin each one of them. Market Conditions State Recession Normal Expansion Probability of state 30% 40% 30% Return of asset A -30% 20% 55% Return of asset B -10% 70% 0% Consider the portfolio with 50% investment in each of the two assets above. Calculatethe expected return and the standard deviation of the portfolio.
The data presented below represents the expected returns on a financial asset in different seasons of the year. Season of year Probability Returns Spring 40% 2% Summer 35% 6% Winter 25% 10% What is the expected return on the asset? ii) What is the standard deviation on the asset? What is the covariance of the asset?
Calculate the standard deviation for the following returns: Year 2017 2018 2019 2020 Return 12.03% -8.24% 1.34% 4.55% Group of answer choices 8.4% 8.1% 7.6% 7.3%
QUESTION 12 Use the table below to answer questions 12 through 15. What is the portfolio tracking error? O A. 81.35 basis points OB. 86.35 basis points O C. 83.35 basis points D. 80.35 basis points Month January February March April May June July August September October November December Portfolio A's Return (%) 2.15 0.89 1.15 -0.47 1.71 0.10 1.04 2.70 0.66 2.15 -1.38 -0.59 Benchmark Index Return (%) 1.65 -0.10 0.52 -0.60 0.65 0.33 2.31 1.10 1.23 2.02 -0.61 -1.20
What is the standard deviation of the portfolio that invests equally in all three assets M, N, and O?
Consider the following portfolio of assets: Loan Weight 1 0.30 2 0.70 Expected returni ம σ2 13% 11% 9.06% 82.0% P12=-0.87 8.72% 76.0% 012-75.0% What is the variance of the portfolio (round to two decimals)? Note: a^2 denotes the square of a. For example, 2^2 = 4, 3^2=9 (0.3)^2*(82.0%) + (0.7)^2*(76.0%) + (0.3) (0.7)(-0.87) (9.06%) (8.72%) = 30.19 (0.3)^2 (82.0%) + (0.7)^2*(76.0%) + 2(0.3) (0.7)(-0.87) (9.06 %) (8.72%) = 15.75 (0.3)^2*(82.0%) + (0.7)^2*(76.0%) + [(0.3) (0.7)]^2 (-0.87) (9.06%) (8.72%) = 41.59 (0.3) (82.0%) + (0.7) (76.0%) + 2(0.3) (0.7)(-0.87) (9.06 %) (8.72%) = 48.93

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS