You are an analyst for a large public pension fund and you have been assigned the task of evaluating two different external portfolio managers (Yand Z). You consider the following historical average retum, standard deviation, and CAPM beta estimates for these two managers over the past five years: Portfollo Actual Avg. Return Standard Devlation Beta Manager Y 11.30 96 13.20 120 Manager Z 8.00 7.80 0.90 Additionally, your estimate for the risk premium for the market portfolio is 4.00 percent and the risk-free rate is currently 5.00 percent. a. For both Manager Y and Manager Z, calculate the expected retum using the CAPM. Round your answers to two decimal places. Manager Y: 9% Manager Z: %

You are an analyst for a large public pension fund and you have been assigned the task of evaluating two different external portfolio managers (Yand Z). You consider the following historical average retum, standard deviation, and CAPM beta estimates for these two managers over the past five years: Portfollo Actual Avg. Return Standard Devlation Beta Manager Y 11.30 96 13.20 120 Manager Z 8.00 7.80 0.90 Additionally, your estimate for the risk premium for the market portfolio is 4.00 percent and the risk-free rate is currently 5.00 percent. a. For both Manager Y and Manager Z, calculate the expected retum using the CAPM. Round your answers to two decimal places. Manager Y: 9% Manager Z: %

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

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You are an analyst for a large public pension fund and you have been assigned the task of evaluating two different external portfolio managers (Y and Z). You consider the following historical average return, standard deviation, and CAPM beta estimates for these two managers over the past five years: Portfolio Actual Avg. Retum Standard Deviation Beta Manger Y 10.20% 12009% 1.20 Manger Z 8.80% 9.90% 0.80 Additionally, your estimate for the risk premium for the market portfolio is 5.00 percent and the risk-free rate is currently 4.50 percent. For both Manager Y and Manager Z, calculate the expected return using the CAPM. Express your answers to the nearest basis point (Le., xx.xx96).
You are an analyst for a large public pension fund and you have been assigned the task of evaluating two different external portfolio managers (Y and Z). You consider the following historical average return, standard deviation, and CAPM beta estimates for these two managers over the past five years: PORTFOLIO ACTUAL AVG. RETURN STD. DEV. BETA Manager Y 10.20% 12.00% 1.20 Manager Z 8.80% 9.90% 0.80 Additionally, your estimate for the risk premium for the market portfolio is 5.00% and the risk free rate is currently 4.50%. a) For both Manager Y and Manager Z, calculate the expected return using the CAPM. Express your answers to the nearest basis point (i.e. xx.xx%). b) Calculate each fund…
You are an analyst for a large public pension fund and you have been assigned the task of evaluating two different external portfolio managers (Y and Z). You consider the following historical average return, standard deviation, and CAPM beta estimates for these two managers over the past five years: Portfolio Actual Avg. Return Standard Deviation Beta Manager Y 11.30 13.20 % 1.20 Manager Z 8.00 7.80 % 0.90 Additionally, your estimate for the risk premium for the market portfolio is 4.00 percent and the risk-free rate is currently 5.00 percent. Calculate each fund manager's average "alpha" (i.e., actual return minus expected return) over the five-year holding period. Round your answers to two decimal places. Manager Y: % Manager Z: % Choose the correct SML graph.
You are an analyst for a large public pension fund and you have been assigned the task of evaluating two different external portfolio managers (Y and Z). You consider the following historical average return, standard deviation, and CAPM beta estimates for these two managers over the past five years: Portfolio Actual Avg. Return Standard Deviation Beta Manager Y 10.20% 12.00% 1.20 Manager Z 8.80% 9.90% 0.80 Additionally, your estimate for the risk premium for the market portfolio is 5.00 percent and the risk-free rate is currently 4.50 percent. a. For both Manager Y and Manager Z, calculate the expected return using the CAPM. Express your answers to the nearest basis point (xx.xx percent). b. Calculate each fund manager's average "alpha" (actual return minus expected return) over the five-year holding period. Show graphically where these alpha statistics would plot on the security market line (SML). c. Explain whether you can conclude from the…
You are an analyst for a large public pension fund and you have been assigned the task ofevaluating two different external portfolio managers (Y and Z). You consider the followinghistorical average return, standard deviation, and CAPM beta estimates for these twomanagers over the past five years:Portfolio Actual Avg. Return Standard Deviation BetaManager Y 10.20% 12.00% 1.20Manager Z 8.80 9.90 0.80Additionally, your estimate for the risk premium for the market portfolio is 5.00 percentand the risk-free rate is currently 4.50 percent.a. For both Manager Y and Manager Z, calculate the expected return using the CAPM.Express your answers to the nearest basis point (i.e., xx.xx%).b. Calculate each fund manager’s average “alpha” (i.e., actual return minus expectedreturn) over the five-year holding period. Show graphically where these alpha statisticswould plot on the security market line (SML).c. Explain whether you can conclude from the information in Part b if: (1) either manager…
You are an analyst for a large public pension fund and you have been assigned the task of evaluating two different external portfolio managers (Y and Z). You consider the following historical average return standard deviation, and CAPM beta estimates for these two managers over the past five years: Additionally, your estimate for the risk premium for the market portfolio is 5.00% and the risk-free rate is currently 4.50% c) Explain whether you can conclude from the info. In Part b if: (1) either manager outperformed the other on a risk-adjusted basis, and (2) either manager outperformed market expectations in general Portfolio Actual Avg.Return Standard Deviation Beta Manager Y 10.20% 12.00% 1.2 Manager Z 8.80% 9.90% 0.8
Mr. Ota is an analyst for a large pension fund and he has been assigned the task of evaluating two different external portfolio managers (K and C). He considers the following historical average return, standard deviation, and CAPM beta estimates for these two managers over the past five years: Actual Average Standard deviation Portfolio Beta Return Manager K Manager C 7.80% 10.05% 0.75 12.0% 15.50% 1.45 Additionally, Mr. Ota estimate for the risk premium for the market portfolio is 5.40% and the risk-free rate is currently 2.50%. a. For both Managers K and C, calculate the expected return using the CAPM. Express your answers to the nearest basis point (i.e., xX.XX%)
You are an analyst for a large public pension fund and you have been assigned the task of evaluating two different external portfolio managers (Y and Z). You consider the following historical average return standard deviation, and CAPM beta estimates for these two managers over the past five years: Additionally, your estimate for the risk premium for the market portfolio is 5.00% and the risk-free rate is currently 4.50% b) Calculate each fund mgr's average "alpha" (i.e. actual return minus expected return) over the 5 year holding period. Show graphically where these alpha statics would plot on the security market line (SML) Portfolio Actual Avg.Return Standard Deviation Beta Manager Y 10.20% 12.00% 1.2 Manager Z 8.80% 9.90% 0.8
You are an analyst for a large public pension fund and you have been assigned the task of evaluating two different external portfolio managers (Y and Z). You consider the following historical average return standard deviation, and CAPM beta estimates for these two managers over the past five years: Additionally , your estimate for the risk premium for the market portfolio is 5.00% and the risk-free rate is currently 4.50% a) For both Manager Y and Manager Z, calculate the expected return using the CAPM, Express your answers to the nearest basis point (i.e. xx.xx%) Portfolio Actual Avg.Return Standard Deviation Beta Manager Y 10.20% 12.00% 1.2 Manager Z 8.80% 9.90% 0.8
You are an analyst for a large public pension fund and you have been assigned the task of evaluating two different external portfolio managers (Yellen and Zagami) who (actively) manage two funds which are considering. Your associates have assembled the following historical average return, standard deviation, and CAPM beta estimates for these two fund managers over the past five years. In addition, you have estimated that the risk premium for the market portfolio is 5.12% and the risk-free rate is currently 4.14%. What is Ms. Yellen's average "alpha" for the period. Report your answer in percentage format rounded to three decimal places. (For example.1234 should be entered as "12.3"). Fund Manager Actual Avg. Return Standard Deviation Ms. Yellen 11% Mr. Zagami 8.24% Answer: 11.07 8.75% Beta 1.18 0.9
which of the following past returns should mutual funds publish in their annual reports? A.Excess return B.Geometric average return C.Arithmetric average return D.Index return
As an equity analyst, you have developed the following return forecasts and risk estimates for two different stock mutual funds (Fund T and Fund U): Forecasted Return CAPM Beta Fund T 9.00% 1.20 Fund U 10.00% 0.80 3.b. Decide which fund is overvalued, undervalued or properly valued and explain why?

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