Consider the following information about the various states of economy and the returns of various investment alternatives for each scenario. Answer the questions that follow. State of the Economy Recession Probability 0.2 % Return on T-Bills, Stocks and Market Index Pay-Rubber- made 10 T- Bills 7 Phillips -22 up 28 Market Index -13

b. As an equity portfolio manager, you may use certain risk-adjusted performance measures. Describe and discuss the following measures of performance evaluation! Treynor Index, William Sharpe, Michael Jensen Using the following table evaluate which is better than other using three different measure of performance evaluation. Asset X E(R)% 12 beta Stdv 1.25 16 Y 11 1.0 12 Risk-free 3 0 0 Market index 12 1 12

Suppose you are considering investing your entire portfolio in three assets A, B and C. You expect that after you invest, four possible mutually exclusive scenarios will occur, with associated returns (in %) for each of the three assets as listed below. The probability of each scenario is given below (Attached image). Find the expected returns and standard deviations of Asset A, B & C. (HINT: the expected return is given by the probability-weighted sum of returns in each scenario. The expected standard deviation is given by the square root of the probability-weighted sum of squared deviations from the expected return.) Is there any reason to invest in Asset A given its low expected return and high standard deviation?

The market portfolio has a beta of  _________ Group of answer choices a. 0 b. 1 c. -1 d. 0.5