Answered: If a fund has a return of 10% and a…

If a fund has a return of 10% and a beta of 1.5, and if the risk-free rate is 5%, and market return rate is 8%, calculate Jensen's Alpha O a. 0.5 O b. 1.4 O c. 0.65

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: If you plot the relationship between portfolio expected return and portfolio beta, what is the slope…

A: Beta is a measure of a security's or portfolio's volatility (or systematic risk) in comparison to…

Q: Given the current risk-free rate is 9% and the market return is 12%. Investment Beta A 0.65 1.12…

A: The required rate of return represents the minimum return investors willing to accept for the given…

Q: What is the beta of a portfolio made up of two risky assets and a risk-free asset? You invest 35% in…

A: Beta: Beta can be defined as the measure of instability of a separate stock relative to the…

Q: If the risk-free rate is 10.2% and the market risk premium is 4.4%, what is the required return for…

A: In the Given question we require to calculate the required return for the market from the following…

Q: If the expected rate of return on AZNG is 12.72, its beta is 1.09 and the market risk premium is 8%,…

A: The objective of the question is to find the risk-free rate given the expected rate of return on a…

Q: If you perform a NPV analysis on a perspective investment using a "d" = 15% and: a. the…

A: “Hi There, Thanks for posting the questions. As per our Q&A guidelines, must be answered only…

Q: The NXP fund has an expected return of 3.60%, with volatility 24.00%. The risk free rate is 1.70%,…

A: The reward-to-volatility ratio, also known as the Treynor ratio, gauges how much excess return a…

Q: Given the non-satiation and risk aversion assumptions, which of the following five portfolios has…

A: The question is based on the concept of sharp ratio, which shows the excess return of a portfolio…

Q: Review the table below listing performance metrics for selected assets. The metrics are defined in…

A: The table provides performance metrics for four assets: a riskless asset, the market portfolio, and…

Q: The average return, standard deviation, and beta for Fund A is given below along with data for the…

A: Share Measure of Performance of Fund A Sharpe Measure means the Amount of return per unit of risk.…

Q: The average return, standard deviation, and beta for Fund A is given below along with data for the…

A: Jensen's alpha = Average return less CAPM return of stock

Q: For CAPM, if we define Rm as the SP500 what is the beta of the SP500 index fund? Re- Rf = alpha +…

A: Beta is releative co-movement of market portfolio with respect of assest. or we can say it captures…

Q: Asset A has an expected return of 22.8% and a beta of 1.8. The expected market return is 14%. What…

A: The risk free rate can be calculated as per the capital asset pricing model.

Q: harpe’s ratio of the Fund A is 1.5, if the beta of Fund A is 1.2, and risk of the fund is 10,…

A: Solution Given Sharpe’s ratio of the Fund A 1.5 beta of Fund A 1.2 risk of the fund…

Q: Find the optimal risky portfolio if you could only use these two funds, ABC and 123, assume the two…

A: Here, ABC 123 Expected return 0.12 0.15 Standard Deviation 0.2 0.3 Correlation…

Q: a. What is the market risk premium (M-FRF)? Round your answer to two decimal places. 96 b. What is…

A: CAPM is the model that is used to show the linear relation between systematic risk…

Q: Find the expected portfolio return and standard deviation if you were to invest 50% of your…

A: A portfolio is a group of investments in which an investor has invested funds or money. A portfolio…

Q: The risk-free rate and the expected market return are 5% and 12%, respectively. According to the…

A: The model that explains the association between expected return and systematic risk is called the…

Q: Risky asset P (an index fund) and risk-free asset F (T-Bill), form a complete portfolio C using P…

A: Sy < 1:Step 1: Define the components of the portfolio.Risky asset (P): Expected return is 15%,…

Q: Electric fund had expected return of 15% and standard deviation for this return is 26%. Beta and…

A: Expected return (Re) = 15% Risk free rate (Rf) = 4% Standard deviation (SD) = 26%

Q: The Manhawkin Fund has an expected return of 17% and a standard deviation return of 33%. The risk…

A: Sharpe ratio is one of the financial metric which is used to analyze the performance of various…

Q: Suppose the beta of PetrolCom is 0.75, the risk - free rate is 3 percent, and the market risk…

A: The expected rate of return on a stock can be calculated using the Capital Asset Pricing Model…

Q: d) The return on the risk-free asset is 5%. You are given the following information: Security Firm A…

A: Risk free rate (Rf) = 0.05Market return (Rm) = 0.12Market standard deviation (Sm) = 0.20

Q: II. Capital Asset Pricing Model. Leah Vine has gathered the following information of three Mutual…

A: Hi, there, thanks for posting the question. As per our honour code, we will answer the first three…

Q: Use the required return-beta equation from the CAPM What is the required return if the risk-free…

A: The Capital Asset Pricing Model (CAPM) measures the relationship between the return and the risk of…

Q: For investment A, the probability of the return being 20.0% is 0.5, 10.0% is 0.4, and -10.0% is 0.1…

A: Probability Return 0.5 20% 0.4 10% 0.1 -10%

Q: A good approximation to use for the return on an average-risk project would be today’s interest rate…

A: A risk premium is the additional return or compensation that an investor demands for taking on…

Q: The risk-free rate and the expected market rate of return and 0.056 and 0.125. Using the CAPM model,…

A: The CAPM formula is used to calculate the expected returns of an asset. It is based on the idea of…

Q: Risky asset P (an index fund) and risk-free asset F (T-Bill), form a complete portfolio C using P…

A: Given:E(rP)=0.15σP=0.22rf=0.07A=4Calculate y∗: y* = E(rp) - rf / (4 * σp^2)= (15% - 7%) / (4 *…

Q: onsider the following information (Assume that Security M and Security N are in the same financial…

A: Expected return is calculated by using CAPM equation. CAPM measures systematic risk Expected return…

Q: If $x is invested in mutual fund A, the annual return has an expectation of $0.1x and a standard…

A: Here,Expectation of Fund A is $0.1 of invetsed AmountExpectation of Fund B is $0.1 of invested…

Q: The risk free rate is 9.5%. If the market portfolio has a mean return of 6.6%, what security market…

A: The capital assets pricing model has been represented by the SML line which gives you required rate…

Q: Suppose that a fund that tracks the S&P has mean E(RM) = 16% and standard deviation OM = 10%, and…

A: Standard Deviation is mesaure the risk which is involved in earning the return from the stock. Lower…

Q: It measures how much rate of return the fund manager/fund generates per unit of systematic risk…

A: Financial investments are the methods through which investors park or save their funds and money in…

Q: The risk free rate is 2% and the expected return on the market is 8% . Lexington fund has expected…

A: treynor ratio = (expected return - risk free rate) / beta

Q: The NXP fund has an expected return of 3.60%, with volatility 24.00%. The risk free rate is 1.70% ,…

A: The reward-to-volatility ratio, also known as the Treynor ratio, gauges how much excess return a…

Q: You are given the following information concerning three portfolios, the market portfolio, and the…

A: Correlation coefficient:The correlation coefficient shows the strength of the relationship between…

Q: You plan to invest in either a mutual fund X or mutual fund Y. The following information about the…

A: Two asset portfolio expected return: The anticipated return on an investment is the value assigned…

Q: You want to evaluate two mutual funds using the information ratio measure for performance…

A: Sharpe ratio refers to the method used for the measurement of the volatility of the returns related…

Q: Calculate the expected return from the following security using the CAPM Capital Asset Pricing…

A: The expected return of a stock is the minimum rate of return that an investor expects from the…

Q: rate of return on security X with a beta of 1.25 is equal to:

A: The Capital Asset Pricing Model (CAPM) describes the relationship between systematic risk and…

Q: What is the expected return of a portfolio of two risky assets if the expected return E(Ri),…

A: A collection of multiple investment avenues in which an investor puts in the funds is considered a…

Q: 6. Consider an optimal risky portfolio with expected return of 8% and standard deviation of 26% and…

A: The slope of the best feasible Capital Allocation Line (CAL) of the optimal portfolio as follows:…

Q: The possible returns of a security I and research returns under three possible states are as…

A: Step 1: Calculate the Expected ReturnsExpected Market Return (E(Rm)): Expected Return…

Q: What is the expected market return if the expected return on STC is 20 percent, its beta is 1.5, and…

A: The Capital Asset Pricing Model (CAPM) is a financial model that helps investors understand the…

Q: f a fund has a return of 12% and a beta of 1.4, and if the risk-free rate is 2%, and market return…

A: Alpha of stock is excess return earned over the return calculated by CAPM.

Question

If a fund has a return of 10% and a beta of 1.5, and if the risk-free rate is 5%, and market return rate is 8%, calculate Jensen's Alpha

O a. 0.5

O b. 1.4

O c. 0.65

O d. 0.42

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

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Similar questions

Fund Beta Deviation (%) Return (%) Rf (%) XXX 1.07 5.13 19 6 YYY 1.02 4.28 17 6 ZZZ 0.86 3.52 12 6 Market 1 3.8 13 6 Compute the Sharpe Measure for the XXX fund. Compute the Treynor Ratio for the ZZZ fund. Compute the Jensen Measure for the YYY fund.
Portfolio Suppose rA ~ N (0.05, 0.01), rB ~ N (0.1, 0.04) with pA,B = 0.2 where rA and rB are CCR’s. a) Suppose you construct a portfolio with 50% for A and 50% for B. Find the variance of the portfolio CCR. b) Find the portfolio expected gross return. c) Find the expected portfolio CCR.
What is the expected return on asset A if it has a beta of 0.5, the expected market return is 13%, and the risk-free rate is 3%? O 6.5% 8% 9.5% 7% O 5%
A project has an assigned beta of 1.24, the risk-free rate is 3.8%, and the market rate of return is 9.2%. What is the project's expected rate of return? A. 15.21% B. 11.41% C. 10.50% D. 14.61%
Đ The risk free rate is 3%. Calculate and rank the following funds using Jensen's Alpha, Treynor measure, Sharpe ratio and M Fund 4 5.82% Market Index 7.60% Fund 1 Fund 2 Fund 3 Return 6.45% 8.96% 9.44% 0.88 1.02 1.38 0.80 1% Beta Std. dev. 2.74% 4.54% 3.72% 2.64% 2.80%
The average return, standard deviation, and beta for Fund A is given below along with data for the S&P 500 Index. Fund Average Return Standard Deviation Beta A 14.5% 24.6% 1.4 S&P 500 14.5% 21.3% 1 Risk-free 1% Calculate the Sharpe measure of performance for the S&P 500.
What is portfolio A's CAPM beta based on your analysis? Round off your answer to three digits after the decimal points. State your answer as a percentage point as 1.234. Compute the Treynor measure for portfolio B. Round off your answer to three digits after the decimal point. State your answer as 1.234
Suppose now that your portfolio must yield an expected return of 13% and be efficient, that is, on the best feasible CAL. What is the proportion invested in the T-bill fund?
The average return, standard deviation, and beta for Fund A is given below along with data for the S&P 500 Index. Fund Average Return Standard Deviation Beta A 25.7% 29% 1.3 S&P 500 17.9% 20% 1 Risk-free 3.8% Calculate the M2 measure of performance for Fund A. Use the correct sign if the answer is negative! Example: -1.23
In the following exercise, separate the investments according to the type of Keynesian demand they are: Transactions (0% to 5%), Precautionary (6% to 9%), and Speculative demand (greater than 10%). Investment in each category has the same risk. So you want to invest in the highest return for the same risk. Take each demand type and choose the highest return and put that amount into the investment. For example, if Bond fund A has a return of 4% and Fund B has a return of 5%, they have the same risk, so you would put $70 into bond fund B. You have the following investments Opportunities ad returns. Fidelity Bonds 11% Fidelity Magellan 9% Putman Bonds one 4% Putman bonds Two 12% Growth Stock One 15% Growth and Income 8% Income Fund 3% Putman Growth…
Consider the following risk-return characteristics for funds A and B: Expected return Risk Fund A (Equity) 12% 20% Fund B (Debt) 9% 16% The correlation coefficient between the returns of fund A and fund B is 0.4. 1. Which Fund is riskier? Write 1 if your answer is Fund A, write 2 if your answer is Fund B, or write 3 if your answer is undetermined. 2.1 What is the weight of fund A in the minimum variance portfolio? 2.4 What is the risk of the minimum variance portfolio? 2.2 What is the weight of Fund B in the minimum variance portfolio? 2.3 What is the expected return of the minimum variance portfolio?
A project under consideration has an internal rate of return of 14% and a beta of 0.6. The risk-free rate is 99%, and the expected rate of return on the market portfolio is 14%. a-1. Calculate the required return. Required return 96

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