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.
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- Assume that the risk-free rate, RF, is currently 9% and that the market return, rm, is currently 16%. a. Calculate the market risk premium. b. Given the previous data, calculate the required return on asset A having a beta of 0.4 and asset B having a beta of 1.8.Portfolio XYZ had a return last year of 14%. The risk-free rate of return was 3%. The market return was 10%. If Portfolio XYZ has a beta = 1.2. Portfolio XYZ had an alpha of _____. +2.6% -2.2% +4% +2.2%The following table reports the percentage of stocks in a portfolio for nine quarters: a. Construct a time series plot. What type of pattern exists in the data? b. Use trial and error to find a value of the exponential smoothing coefficient that results in a relatively small MSE. c. Using the exponential smoothing model you developed in part (b), what is the forecast of the percentage of stocks in a typical portfolio for the second quarter of year 3?
- Suppose the risk free return is 6%. The beta of a managed portfolio is 1.5, the alpha is 3%, and the average return is 18%. Based on Jensen's measure of portfolio performance, you would calculate the return on the market portfolio as ___ % ?Please do this in Excel using relevant formulas. Stock A has a beta of 0.5, and investors expect it to return 8%. Stock B has a beta of 1.5, and investors expect it to return 12%. Use the CAPM to find the market risk premium and the expected rate of return on the market.You are evaluating the performance of two portfolio managers, and you have gathered annual return data for the past decade: Year Manager X Return (%) Manager Y Return (%) 1 -1.5 -6.5 -1.5 -3.5 3 -1.5 -1.5 4 -1.0 3.5 5 0.0 4.5 4.5 6.5 7 6.5 7.5 8 8.5 8.5 13.5 12.5 10 18.5 14.5 a. For each manager, calculate (1) the average annual return, (2) the standard deviation of returns, and (3) the semi-deviation of returns. Do not round intermediate calculations. Round your answers to two decimal places. Average annual return Standard deviation of returns Semi-deviation of returns Manager X % % % Manager Y % % % b. Assuming that the average annual risk-free rate during the 10-year sample period was 3.0%, calculate the Sharpe ratio for each portfolio. Based on these computations, which manager appears to have performed the best? Do not round intermediate calculations. Round your answers to three decimal places. Sharpe ratio (Manager X): Sharpe ratio (Manager Y): Based on Sharpe ratio -Select- )…
- Suppose the risk free rate is 5% and the market portfolio has an expected return of 10%. Portfolio Z has a correlation coefficient with the market of 0.1 and a variance of 0.16. The market portfolio has a variance of 0.09. According to the CAPM, what is the beta of portfolio Z?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?An analyst has modeled the stock of Crisp Trucking using a two-factor APTmodel. The risk-free rate is 6%, the expected return on the first factor (r1) is12%, and the expected return on the second factor (r2) is 8%. If bi1 5= 0.7 andbi2 5= 0.9, what is Crisp’s required return?
- Suppose that the returns on an investment are normally distributed with an expected return of 16% and standard deviation of 3%. What is the likelihood of receiving a return that is equal to or less than 19%? (Hint: the area under a curve for 1 std dev is 34.13%, 2 std dev is 47.73% and 3 std dev is 49.87%.).a. Compute the expected rate of return on investment i given the following information: the market risk premium is 5%; Rf = 6%; βi = 1.2. b. Compute E(RM).Suppose the risk-free return is 2% and the return on the market is 10%. The beta of a managed portfolio is 1.5, and the average realized return is 13%. According to the CAPM, Jensen’s alpha of the managed portfolio is: A) –1% B) 0% C) 1% D) 2% E) none of the above
