You are an analyst for a large public pension fund and you have been assigned the task of evaluating two different externalportfolio managers (Y and Z). You consider the following historical average return, standard deviation, and CAPM beta estimatesfor these two managers over the past five years:Portfolio Actual Avg. Retum Standard Deviation BetaManger Y 10.20% 12009% 1.20Manger Z 8.80% 9.90% 0.80Additionally, your estimate for the risk premium for the market portfolio is 5.00 percent and the risk-free rate is currently 4.50percent.For both Manager Y and Manager Z, calculate the expected return using the CAPM. Express your answers to the nearest basispoint (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 Standard Deviation Beta Manger Y 10.20% 12.00% 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 (.e., xx.xx9%).

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 Manger Y 10.20% 12.00% 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 (.e., xx.xx9%).

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 extermal portfolio managers (Y and 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 96 1.20 Manager Z 8.00 96 7.80 96 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 returm using the CAPM. Round your answers to two decimal places. Manager Y: 9% Manager Z: 9%
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 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 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% 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
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% 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 (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
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
You have just been appointed as a fund manager for Gate Way Fund, of which you will be responsible of a portfolio that consists of two assets. The analysts have provided you with the expected returns and standard deviations of returns of which are listed in the table below: Asset A Asset B Expected Return 7% 11% Standard Deviation 15% 21% Calculate the expected return of the portfolio if half is invested in asset A. If the covariance of the two assets is 28, calculate the correlation coefficient of the portfolio. Calculate the variance of the portfolio if the investments in the two assets classes is equal. Calculate the standard deviation of the portfolio if the assets are equally weighted. The two asset portfolio model can be extended to a portfolio with more assets. Explain the implications of this approach for the understanding of portfolio risk and discuss the practical problems of applying the model in this fashion.
An insurance fund is analysing the performance of three different fund managers A, B and C. Each manager invests in one third of all asset classes to maintain a well diversified portfolio. The following information is available: A B C Market portfolio Average net return (%) 5 8 9 9 Volatility (%) 18 24 21 20 Beta 0.8 1.1 1.3 A risk free rate is established to be 2%. Calculate for each of the fund managers the expected return using CAPM, ex post Sharpe Ratio, Treynor Ratio, M2 alpha and Jensen’s alpha. Interpret your results.
You plan to invest in either a mutual fund X or mutual fund Y. The following information about the annual return (%) of each of these investments under different demand levels is available, along with the probability that each of these states of nature will OCcur: Demand Probability Fund X Fund Y High 0.4 30% 25% Medium 0.4 22% 34% low 0.2 17% 25% a) Compute expected return, standard deviation for each investment and covariance of the mutual fund X and mutual fund Y. b) Would you invest in the mutual fund X or Y? Explain. c) If you chose to invest in mutual fund X and the state of nature turns up to be the low demand, what do you think about the possibility of the opportunity loss of 8% in comparison to investing in mutual fund Y?

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