Question Five As an investment analyst you have been asked to evaluate three mutual funds with the following characteristics Mega Fund: This invests in money market instruments and the shares of blue-chip companies listed on the stock market. Bega Fund: This is a balanced fund which invests in shares of financial institutions and corporate bonds in equal proportion. Diva Fund: This is an index tracking fund which invests in all the shares of the companies listed on the stock exchange. It was set up to mimic the Ghana Stock Exchange All-Share Index. The information relating to the three funds for the last five years is provided below: Year Mega Fund Bega Fund Diva Fund 1 33.60 27.90 14.70 2 18.30 -15.20 31.40 3 18.60 15.40 -13.30 4 -12.30 11.10 18.30 5 28.70 28.70 10.20 You have also been supplied with information that the Mega Fund has a beta coefficient of 0.90, the Bega Fund has a beta coefficient of 0.95 while the Diva Fund has a beta coefficient of 1.0. The rate on Government of Ghana Five-Year Treasury Note is 8.5%. You are required to assess the performance of these mutual funds based on the following: (i) Sharpe’s Performance Index (ii) Treynor’s Performance Index (iii) Jensen’s Performance Index In each case explain your results.
Question Five
As an investment analyst you have been asked to evaluate three mutual funds with the following
characteristics
Mega Fund: This invests in
on the stock market.
Bega Fund: This is a balanced fund which invests in shares of financial institutions and corporate
bonds in equal proportion.
Diva Fund: This is an index tracking fund which invests in all the shares of the companies listed on
the stock exchange. It was set up to mimic the Ghana Stock Exchange All-Share Index.
The information relating to the three funds for the last five years is provided below:
Year Mega Fund Bega Fund Diva Fund
1 33.60 27.90 14.70
2 18.30 -15.20 31.40
3 18.60 15.40 -13.30
4 -12.30 11.10 18.30
5 28.70 28.70 10.20
You have also been supplied with information that the Mega Fund has a beta coefficient of 0.90, the
Bega Fund has a beta coefficient of 0.95 while the Diva Fund has a beta coefficient of 1.0. The rate
on Government of Ghana Five-Year Treasury Note is 8.5%.
You are required to assess the performance of these mutual funds based on the following:
(i) Sharpe’s Performance Index
(ii) Treynor’s Performance Index
(iii) Jensen’s Performance Index
In each case explain your results.
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