Question

You want to evaluate three mutual funds using the Treynor measure for performance evaluation. The risk-free return during the sample period is 6%. The average returns, standard deviations, and betas for the three funds are given below, in addition to information regarding the S&P 500 Index. FundA 13% 10% 0.5 Average Return Standard Deviation Beta Fund B Fund C S&P 500 19 % 20% 1.0 25 % 30% 1.5 18 % 16% 1.0

Answer #1

You want to evaluate three mutual funds using the Jensen measure
for performance evaluation. The risk-free return during the sample
period is 6%, and the average return on the market portfolio is
18%. The average returns, standard deviations, and betas for the
three funds are given below.
Average return
Standard deviation
Beta
Fund A
20%
20%
1.1
Fund B
18%
25%
1
Fund C
16%
30%
0.9
The fund with the highest Jensen measure is
A.
Fund C.
B....

You want to evaluate three mutual funds using the information
ratio measure for performance evaluation. The risk-free return
during the sample period is 6%, and the average return on the
market portfolio is 19%. The average returns, residual standard
deviations, and betas for the three funds are given below.
Average Return
Residual Standard Deviation
Beta
Fund A
20
%
4.00
%
0.8
Fund B
21
%
1.25
%
1.0
Fund C
23
%
1.20
%
1.2
The fund with the...

You have researched information on 3 mutual funds. If the
risk-free rate is currently 5.5%, which one of these funds has the
best risk-adjusted performance?
Fund Q:
Average annual return: 8.21%
Standard deviation: 7.00%
Beta coefficient: 0.921
Fund R:
Average annual return: 11.55%
Standard deviation: 13.52%
Beta coefficient: 1.100
Fund S:
Average annual return: 12.00%
Standard deviation: 16.05%
Beta coefficient: 1.825
A. Fund S, because it has the highest Treynor ratio
B. Fund R, because it has the highest Sharpe...

2) An investment advisor is comparing performance of two mutual
funds each of which is designed to outperform the S&P 500.
The Freedelity Fund returned 19%
The JPStanley Fund returned 16%.
The betas of the Freedelity & JPStanley funds are 1.5 &
1.0 respectively.
T-Bill rate = 6%; and the S&P 500 returned 14%.
Using CAPM, Which fund was the superior performer? Why?

2. Using the information on three mutual funds provided in the
following table, calculate the Treynor Ratio for each fund and rank
them from best (1) to worst (3): Show your work
in the uploaded document.
Fidelity Vanguard Blackrock
Return 0.1313 0.1710 0.1279
Beta 0.80 1.20 1.00
Standard
Deviation 0.22
0.40
0.28
Risk-free
Rate is 7%

1) An investment advisor is comparing performance of two mutual
funds each of which is designed to outperform the S&P 500.
The Freedelity Fund returned 19%
The JPStanley Fund returned 16%.
Based on the information above, which is the better fund in
terms of the manager’s ability to select stocks?
A. Freedelity Fund has better stock selection
B. JP Stanley Fund has better stock selection
C. S&P 500 Index Fund has better stock selection
D. Freedelity & JP Stanley Funds...

You have the option to invest in an S&P 500 Index fund that
guarantees the average performance of stocks in the index. Assume
that exactly 500 companies are in the economy and thus beta for
this index fund is equal to 1, while the expected return of this
index fund is 20%. An alternative risk-free asset has a return rate
of 10%. Using the straight-line tool, draw the market line that
plots the relationship between expected returns and beta.
Consider...

A measure of risk-adjusted performance that is often used is the
Sharpe ratio. The Sharpe ratio is calculated as the risk premium of
an asset divided by its standard deviation. The standard deviation
and return of the funds over the past 10 years are listed in the
following table. Calculate the Sharpe ratio for each of these
funds. Assume that the expected return and standard deviation of
the company stock will be 17 percent and 70 percent, respectively.
Calculate the...

The following data are available relating to the performance of
Wildcat Fund and the market portfolio:
Wildcat
Market Portfolio
Average return
18
%
15
%
Standard deviations of returns
25
%
20
%
Beta
1.25
1.00
Residual standard deviation
2
%
0
%
The risk-free return during the sample period was 7%.
What is the information ratio measure of performance evaluation for
Wildcat Fund?
Multiple Choice
1.00%
8.80%
44.00% (Incorrect)
50.00%
67.00%

The following data are available relating to the performance of
Aloha Fund and the market portfolio:
Aloha Fund
Market Portfolio
Average Return
18%
14%
Standard deviations of returns
30%
22%
Beta
1.4
1.0
Residual Standard Deviation
4.0%
0.0%
The risk-free return during the sample period was 6%.
If you wanted to evaluate the Aloha Fund using the M2
measure, approximately what percent of the adjusted portfolio would
need to be invested in T-Bills?
Select one:
a. 73%
b. 27%
c....

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