Question

The​ risk-free rate is currently 7.7​%. Use the data in the accompanying table for the Fio​...

The​ risk-free rate is currently 7.7​%. Use the data in the accompanying table for the Fio​ family's portfolio and the market portfolio during the year just ended to answer the questions that follow.  ​(Click on the icon located on the​ top-right corner of the data table below in order to copy its contents into a​ spreadsheet.)

Data Item

​Fios' Portfolio

Market Portfolio

Rate of return

12.6%

11.1​%

Standard deviation of return

12.6​%

10.1​%

Beta

0.99

1.00

a. Calculate​ Sharpe's measure for the portfolio and the market. Compare the two​ measures, and assess the performance of the​ Fios' portfolio during the year just ended.

b. Calculate​ Treynor's measure for the portfolio and the market. Compare the​ two, and assess the performance of the​ Fios' portfolio during the year just ended.

c. Calculate​ Jensen's measure​ (Jensen's alpha). Use it to assess the performance of the​ Fios' portfolio during the year just ended.

d. On the basis of your findings in parts ​a, b, and ​c, assess the performance of the​ Fios' portfolio during the year just ended.

a. The​ Sharpe's measure for the Fio portfolio is _____ ​(Round to two decimal​ places.)

The​ Sharpe's measure for the market portfolio is ____ ​(Round to two decimal​ places.)

Based on the computed​ Sharpe's measures, the Fio​ portfolio's performance is _____ (superior, or inferior)

to the​ market's performance.  ​(Select from the​ drop-down menu.)

b. The​ Treynor's measure for the Fio portfolio is ____% ​(Round to two decimal​ places.)

The​ Treynor's measure for the market portfolio is ____​%. (Round to two decimal​ places.)

Based on the computed​ Treynor's measures, the Fio​ portfolio's performance is ____ (superior, inferior)

to the​ market's performance.  ​(Choose from the​ drop-down menu.)

c. The​ Jensen's measure for the Fio portfolio is ____​%. (Round to two decimal​ places.)

Based on the computed​ Jensen's measure, the Fio portfolio ____ (outperforms, underperforms) the market.  ​(Select from the​ drop-down menu.)

d. On the basis of your findings in parts ​a, b, and ​c, the Fio portfolio ____ ( outperformed, underperformed) the market during the year just ended.  ​(Select from the​ drop-down menu.)

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Homework Answers

Answer #1

A SHARPE MEASUE

FIOS 0.3889

MARKET 0.3366

FIOS PERFORMANCE IS SUPERIOR

B TREYNOR

FIOS 4.9495%

MARKET 3.4%

FIOS PERFORMANCE IS SUPERIOR

C JENSEN

FIOS 1.534%

OUTPERFORMED

D FIOS PORTFOLIO IS OUTPERFORMED

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