Portfolio A returned 9.20% p.a. over the evaluation period compared to 5.00% p.a. for the S&P 500. This equates to a difference, or outperformance of 4.20% p.a. However, according to CAPM, the annualized alpha of portfolio A is 4.74% p.a. Explain the difference between the two numbers.

Q: Calculate the reward-to-variability (Sharpe) ratio if you have 75% in Security C and 25% in Security…

A: The Sharpe Ratio essentially measures the excess return earned per unit of risk taken. A higher…

Q: Assume analysts provide the following types of information. Assume no short selling and a risk…

A: The formula for the Sharpe ratio is:​Sharpe Ratio=​The higher the Sharpe ratio, the better the…

Q: A firm has a choice between 2 investment proposals. Using the information in the table below, which…

A: Since the required return is equal for both investments, we can determine which investment gives…

Q: The stock of Arbor Pet Trees (APT) is priced based on the given systematic risk factors. Estimated…

A: Actual return = 9.5%/100 = 0.0950 in decimalsRisk-free rate = 2.6%/100 = 0.0260 in decimalsBeta…

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: Elrond has made an investment that will generate returns that are based on the state of the economy.…

A: Portfolio variance:Portfolio variance is a statistical measure of how much the returns on different…

Q: Which of these two companies is best for investment?  Trend Probability Rate of Retrun (Company A)…

A: We need to calculate expected return rate of return from investment by multiplying the probability…

Q: The table below depict the expected return CCC Berhad and XXX Berhad for April and May: a)…

A: Here,

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: Over a particular period, an asset had an average return of 12.1 percent and a standard deviation of…

A: Expected return of an asset is the profitability of investing in that asset. It is the percentage of…

Q: During the year just ended, Anna Schultz's portfolio, which has a beta of 0.91, earned a return of…

A: Beta = 0.91Returns  = 8.4%Risk-free rate = 3.3%Return on market portfolio = 9.1%

Q: Given an expected return of 8% and a standard deviation of 9%, we can predict that there is a _____…

A: Given: Expected Return/Mean = 8% Standard deviation σ = 9% Observed Values = -19% and 35% Using the…

Q: Assume that the short-term risk-freerate is 3%, the market index S&P500 is expected to pay returns…

A: In order to compute expected return capital asset pricing model is used. The formula to compute…

Q: use those estimates to calculate the expected FF3 monthly return

A: Using multiple linear regression, we are going to determine the alpha and beta of the each of the…

Q: calculate tracking error if the return from the portfolio is 15.5% and the return from the bench…

A: Tracking error is computed by following formula-Tracking error = Rp - RiWhere,Rp = return from…

Q: The variance of A is 0.15, the variance of B is 0.45. The correlation between A and B is -0.76. The…

A: A portfolio is made up of investments in two or more different financial assets or two or more…

Q: A portfolio has an expected return of 17.64% and a variance of 1.51%. If the risk-free rate is…

A: The extra return received by an investment above the risk-free rate is measured by the Sharpe ratio.…

Q: Suppose that the market risk premium is 5% and the risk-free rate is 4%. Risky assets A and B are…

A: The expected return of a portfolio constructed of two assets can be calculated using the Capital…

Q: 18. An example of systematic risk is: a. changes in the Federal budget deficit that could affect…

A: As per the Honor code of Bartleby we are bound to given the answer of first question only, Please…

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: The following are monthly percentage price changes for three market indexes Month DJIA S&P 500…

A: Covariance exhibits the statistical correlation between the two variances of the two variables. A…

Q: Calculate volatility and lower partial moment using the data below. ( , ) Target return is 0% Rate…

A: No. Return Return - mean 6.95 (return - mean)2 1 8.3 1.35 1.82 2 6.8 -0.15 0.02 3 -2.4 -9.35…

Q: If an investment’s expected return (mean return) does not plot on the SML, what does it show?…

A: Security market line (SML) is a grapical representation of the Capital Asset Pricing Model. All the…

Q: Consider three investments. You are given the following means, standard deviations, and correlations…

A: The solver function in Excel helps us solve complex problems with multiple constraints.We begin by…

Q: Calculate the expected return. Do not round intermediate calculations. Round your answer to two…

A: The answers and the explanation can be seen below:

Q: Given the following sample data, calculate the performance measures for portfolio P and the market…

A: Portfolio performances can be measured with some techniques such as Sharpe ratio, Treynor ratio and…

Q: The returns on share A follow the market model with coefficients aa = 0.01, ßa = 1.25. If at time t,…

A: Alpha term (a) = 0.01 Beta term (b) = 1.25 Market return (Rm) = 0.02 Actual return of A (Re) = 0.025…

Q: None

A: Step 1: Step 2: Step 3 and 4:

Q: Problem 24-9 (Algo) Consider the two (excess return) Index-model regression results for stocks A and…

A: Market return = 11%Risk free rate = 4%To find: Alpha, Information ratio, Sharpe ratio, and Treynor…

Q: iv. Treynor measure 9.8330

A: First, I'm going to list the formula used to determine the Missing value (Treynor's measure) for…

Q: Consider the following information: State of Probability of Economy State of Economy Boon Good Poor…

A: State of EconomyProbabilityStock 'A ReturnStock'B ReturnStock' C…

Q: ADAM COMPANY HAS AN OLD MACHINE THAT COST WHEN PURCHASED $150000, THE FIRM DEPRECIATION METHOD IS…

A: Hi There, thanks for posting the question. But as per Q&A guidelines, we must answer the first…

Q: A market research survey is available for 3000 JD. Using a decision tree analysis, it is found that…

A: The question is multiple choice question  Required  Choose the Correct Option.

Q: 6-11. (Measuring risk and rates of return) a. Given the holding-period returns shown here, compute…

A: (a)  Average return refers to the sum total of the returns that are received within holding period.…

Q: State of Economy Boom Normal Bust Probability of State Stock A Rate of Stock B Rate of Stock C Rate…

A: In portfolio analysis, the expected return and standard deviation are crucial metrics for evaluating…

Q: I need help with this problem and want to set up for excel with formulas.

A: Value of Z at the 95% Confidence Level = 1.96 Calculation of expected return, standard deviation and…

Q: Consider the two (excess return) Index-model regression results for stocks A and B. The risk-free…

A: Market return = 11%Risk free rate = 4%To find Alpha, Information ratio, Sharpe ratio, and Treynor…

Q: The following table, shows the one year retum dist-buton Stad a. The expected retum The standard…

A: probability Return Expected Return 0.4 -100 -40 0.2 -65 -13 0.2 -60 -12 0.1 -25 -2.5 0.1…

Q: Assume that the five-day VaR of a portfolio with a confidence level of 95% is $10 million. What is…

A: The formula to determine VAR is as follows: VAR = Z score × σ xt Where z score =inverse cumulative…

Q: Assume that the short-term risk-free rate is 3%, the market index S&P500 is expected to pay returns…

A: Since you have asked multiple question, we will solve the first question for you. If you want any…

Q: uppose an investment is equally likely to have a 40% return or a - 15% return. The variance on the…

A: