Congratulations! Your portfolio returned 12.9% last year, 2.4% better than the market return of 10.5%. Your portfolio had a standard deviation of earnings equal to 17%, and the risk-free rate is equal to 3.9%. Calculate Sharpe's measure for your portfolio. If the market's Sharpe's measure is 0.36, did you do better or worse than the market from a risk/return perspective?

Congratulations! Your portfolio returned 12.9% last year, 2.4% better than the market return of 10.5%. Your portfolio had a standard deviation of earnings equal to 17%, and the risk-free rate is equal to 3.9%. Calculate Sharpe's measure for your portfolio. If the market's Sharpe's measure is 0.36, did you do better or worse than the market from a risk/return perspective?

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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4. During a particular year, the T-bill rate was 6%, the market return was 14%, and a portfolio manager with a beta of 0.5 realized a return of 10%. Evaluate the manager based on the portfolio alpha.
Assume that the short-term risk-free rate is 6%, the market index S&P500 is expected to pay returns of 30% with the standard deviation equal to 40%. Asset A pays on average 10%, has a standard deviation equal to 40% and is NOT correlated with the S&P500. Asset B pays on average 16%, also has a standard deviation equal to 40% and has a correlation of 1 with the S&P500. Determine whether asset A and B are overvalued or undervalued, and explain why. (Beta of asset i (?i) = ?i ?iM / ?M, where ?i, ?M are standard deviations of asset i and market portfolio, ?iM is the correlation between asset i and the market portfolio)
Use the data below to answer the following question. If you have a risk-aversion factor of 2.5 and the risk-free rate is 2%, you would invest _______% of your money in the risky portfolio. Year Return 2014 -15% 2015 -5% 2016 30% 2017 -10% 2018 35%
A manager's portfolio generated a return of 11.3% over the past year. The portfolio's beta was 1.16 and the return standard deviation was 15.7%. The market return was 9.8%, its return standard deviation was 13.4%, and the risk-free rate was 3.7%. What are the portfolio's Sharpe ratio, Treynor ratio, and Jensen's alpha?
Suppose that during the coming year, the risk free rate, rRF, is expected to remain the same, while the market risk premium (rM − rRF), is expected to fall. Given this forecast, which of the following statements is CORRECT? a. The required return on all stocks will remain unchanged. b. The required return will fall for all stocks, but it will fall more for stocks with higher betas. c. The required return for all stocks will fall by the same amount. d. The required return will fall for all stocks, but it will fall less for stocks with higher betas. e. The required return will increase for stocks with a beta less than 1.0 and will decrease for stocks with a beta greater than 1.0.
All parts dont do handwritten
Consider historical data showing that the average annual rate of return on the S&P 500 portfolio over the past 85 years has averaged roughly 8% more than the Treasury bill return and that the S&P 500 standard deviation has been about 33% per year. Assume these values are representative of investors' expectations for future performance and that the current T-bill rate is 4%. Calculate the utility levels of each portfolio for an investor with A = 2. Assume the utility function is U = E(r) Note: Do not round intermediate calculations. Round your answers to 4 decimal places. Negative amounts should be indicated by a minus sign. - 0.5 × Ag². X Answer is complete but not entirely correct. WIndex U(A = 2) 0.0111 0.0504 0.0808 x 0.1026 0.1164 X 0.1200 X WBills 0.0 0.2 0.4 0.6 0.8 1.0 1.0 0.8 0.6 0.4 0.2 0.0
d) Assume that the short-term risk-free rate is 3%, the market index S&P500 is expected to pay returns of 15% with the standard deviation equal to 20%. Asset A pays on average 5%, has standard deviation equal to 20% and is NOT correlated with the S&P500. Asset B pays on average 8%, also has standard deviation equal to 20% and has correlation of 0.5 with the S&P500. Determine whether asset A and B are overvalued or undervalued, and explain why. (Hint: Beta of asset i (B¡) = "PIM , where ơị,ɑm are standard deviations of asset i and market OM portfolio, Pim is the correlation between asset i and the market portfolio)
Chee Chew's portfolio has a beta of 1.25 and earned a return of 13.6% during the year just ended. The risk-free rate is currently 3.9%. The return on the market portfolio during the year just ended was 10.7%. a. Calculate Jensen's measure (Jensen's alpha) for Chee's portfolio for the year just ended. b. Compare the performance of Chee's portfolio found in part a to that of Carri Uhl's portfolio, which has a Jensen's measure of -0.19. Which portfolio performed better? Explain. c. Use your findings in part a to discuss the performance of Chee's portfolio during the period just ended. a. The Jensen's measure (Jensen's alpha) for Chee's portfolio is (Round to two decimal places.) (…)
You are analyzing a Time Series of historic market information and found the following information for a particular investment security: the Rate of Return in 2012 was -6.72%; was 18.22% in 2013; was 7.75% in 2014; was 11.45% in 2015; was 4.94% in 2016; and was 18.11% in 2017. What is the arithmetic average rate of return? Show your answer as a percentage rounded to two places (12.34% for example). Group of answer choices 7.64% 8.96% 8.14% 7.24% None of the above
Consider the following expected returns, volatilities, and correlations: Stock Duke Energy Microsoft Wal-Mart Expected Standard Correlation with Correlation with Correlation with Return Duke Energy Deviation 14% 6% 44% 24% 23% 14% 1.0 -1.0 0.0 Microsoft -1.0 1.0 0.7 Wal-Mart 0.0 0.7 1.0 a) Consider a portfolio consisting of only Duke Energy and Microsoft. What is the percentage of your investment (portfolio weight) that you would place in Duke Energy stock to achieve a risk-free investment. b) What are the expected return and volatility of a portfolio that consists of a long position of $10,000 in Wal-Mart and a short position of $2000 in Microsoft? c) What are the expected return and platility of a portfolio that has $3000 invested in Duke Energy, $4000 invested in Microsoft, and $3000 invested in Walmart stock?
What is the expected rate of return on R. Halsey Inc. stock if it has a correlation coefficient equal to 0.48 with the market portfolio and a standard deviation of 0.25? The risk free rate is 3% and the return on the market is 12%. Assume CAPM holds and the risk free and market combined portfolio has a standard deviation of 14% and an expected return of 8 %

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