CHAPTER 25—EVALUATION OF PORTFOLIO PERFORMANCE
TRUE/FALSE
Question: Investors want their portfolio managers to completely diversify their portfolio, that is, eliminate all systematic risk.
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Question: A peer group comparison collects the returns produced by a representative universe of investors over a specific period of time and displays them in a simple boxplot format.
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Question: The typical proxy for the market portfolio is the S&P 500 Index because it is diversified and price weighted.
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Question: Treynors performance measure implicitly assumes a completely diversified portfolio.
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Question: A negative Treynor measure (negative T) for a portfolio always indicates that the portfolio would plot below the SML.
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Question: Sharpes performance assumes that all portfolios are completely diversified.
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Question: The Sharpe measure examines the risk premium per unit of systematic risk.
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Question: The Sharpe and Treynor measures complement each other and thus both should be used to measure portfolio performance.
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Question: The Sharpe and Treynor measures always give different rankings.
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Question: Overall performance is the total return above the risk free rate.
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Question: The Jensen measure requires that each periods rates of return and risk-free rate be measured, rather than using the long-term averages as in the Treynor and Sharpe measures.
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Question: The ranking differences between the Sharpe, Treynor and Jensen performance measures occur because of the differences in diversification.
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Question: Funds with low levels of diversification tend to “beat the market.”
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Question: The portfolio performance measure that can be most affected by a benchmark error is the Sharpe measure.
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Question: Attribution analysis separates a portfolio managers performance into an allocation effect and selection effect.
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Question: An appropriate composite risk measure that indicates the relative price volatility for a bond compared to interest rate changes is the bonds yield to maturity.
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Question: In evaluating bond performance, the Lehman Brothers Index is an appropriate risk measure.
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Question: The policy effect is a difference in bond portfolio performance from that of a benchmark index due to a difference in duration.
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Question: Duration is considered a good measure of risk for a bond portfolio because it indicates the relative volatility of the bond or portfolio due to interest rate changes and also the rating of the bonds.
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Question: A test of bond performance over time indicated that bond portfolio managers are more consistent over time than equity managers.
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Question: A portfolio manager should be evaluated many times and in a variety of market environments before a final judgment is reached regarding his/her strengths and weaknesses.
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Question: Two desirable attributes of a portfolio managers performance are the ability to derive above-average returns for a given risk class and the ability to time the market.
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Question: The most common manner of evaluating portfolio managers is a peer group comparison.
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Question: Treynor developed the first composite measure of portfolio performance by introducing the capital market line, which defines the relationship between the return of a portfolio over time and the return for the market portfolio.
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Question: The Sharpe measure of portfolio performance divides the portfolios risk premium by the portfolios beta.
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Question: The major requirements of a portfolio manager include the following, except
| a. | Follow the clients policy statement. |
| b. | Completely diversify the portfolio to eliminate all unsystematic risk.. |
| c. | The ability to derive above-average risk adjusted returns. |
| d. | Completely diversify the portfolio to eliminate all systematic risk. |
| e. | None of the above (that is, all are requirements of a portfolio manager) |
Answer:
Question: Portfolio managers who anticipate an increase in interest rates should
| a. | Act to keep the duration constant. |
| b. | Decrease the portfolio duration. |
| c. | Increase the portfolio duration. |
| d. | Assume higher risk in the market. |
| e. | Invest in junk bonds. |
Answer:
Question: Treynor showed that rational, risk averse investors always prefer portfolio possibility lines that have
| a. | Zero slopes. |
| b. | Slightly negative slopes. |
| c. | Highly negative slopes. |
| d. | Slightly positive slopes. |
| e. | Highly positive slopes. |
Answer:
Question: The measure of performance which divides the portfolios risk premium by the portfolios beta is the
| a. | Sharpe measure. |
| b. | Jensen measure. |
| c. | Fama measure. |
| d. | Alternative components model (MCV). |
| e. | Treynor measure. |
Answer:
Question: Sharpes performance measure divides the portfolios risk premium by the
| a. | Standard deviation of the rate of return. |
| b. | Variance of the rate of return. |
| c. | Slope of the funds characteristic line. |
| d. | Beta. |
| e. | Risk free rate. |
Answer:
Question: Which measure of portfolio performance allows analysts to determine the statistical significance of abnormal returns?
| a. | Sharpe measure |
| b. | Jensen measure |
| c. | Fama measure |
| d. | Alternative components model (MCV) |
| e. | Treynor measure |
Answer:
Question: Selectivity measures how well a portfolio performed relative to a
| a. | Market portfolio (S&P 400). |
| b. | Portfolio of the same securities in the previous period. |
| c. | Naively selected portfolio of equal risk. |
| d. | Naively selected portfolio of equal return. |
| e. | World market portfolio. |
Answer:
Question: A portfolio performance measurement technique that decomposes the return of a managers holdings to a predetermined benchmarks returns and separates the difference into an allocation and selection is called
| a. | Immunization analysis. |
| b. | Performance attribution analysis. |
| c. | Tactical rankings. |
| d. | Convexity utilization. |
| e. | Duration matching attrition. |
Answer:
Question: Under the performance attribution analysis method, the ____ measures the managers decision to over- or underweight a particular market segment in terms of that segments return performance relative to the overall return to the benchmark.
| a. | Selection effect |
| b. | Allocation effect |
| c. | Distribution effect |
| d. | Diversification effect |
| e. | Attribution effect |
Answer:
Question: Under the performance attribution analysis method, the ____ measures the managers ability to form specific market segment portfolios that generate superior returns relative to the way in which the comparable market segment is defined in the benchmark portfolio weighted by the managers actual market segment investment proportions.
| a. | Selection effect |
| b. | Allocation effect |
| c. | Distribution effect |
| d. | Diversification effect |
| e. | Attribution effect |
Answer:
Question: If the return increases as more global investments with low correlation are added to the market portfolio, the efficient frontier moves
| a. | Up and right. |
| b. | Up and left. |
| c. | Down and right. |
| d. | Down and left. |
| e. | Up only. |
Answer:
Question: Wagner and Tito suggested that a bond portfolio return differing from the return from the Lehman Brothers Index can be divided into four components. Which of the following is not included?
| a. | Policy effect |
| b. | Rate anticipation effect |
| c. | Sector/Quality effect |
| d. | Analysis effect |
| e. | Trading effect |
Answer:
Question: Information ratio portfolio performance measures
| a. | Adjust portfolio risk to match benchmark risk. |
| b. | Compare portfolio returns to expected returns under CAPM. |
| c. | Evaluate portfolio performance on the basis of return per unit of risk. |
| d. | Indicate historic average differential return per unit of historic variability of differential return. |
| e. | None of the above. |
Answer:
Question: Relative return portfolio performance measures
| a. | Adjust portfolio risk to match benchmark risk. |
| b. | Compare portfolio returns to expected returns under CAPM. |
| c. | Evaluate portfolio performance on the basis of return per unit of risk. |
| d. | Indicate historic average differential return per unit of historic variability of differential return. |
| e. | None of the above. |
Answer:
Question: Excess return portfolio performance measures
| a. | Adjust portfolio risk to match benchmark risk. |
| b. | Compare portfolio returns to expected returns under CAPM. |
| c. | Evaluate portfolio performance on the basis of return per unit of risk. |
| d. | Indicate historic average differential return per unit of historic variability of differential return. |
| e. | None of the above. |
Answer:
Question: For a poorly diversified portfolio the appropriate measure of portfolio performance would be
| a. | The Treynor measure because it evaluates portfolio performance on the basis of return and diversification. |
| b. | The Sharpe measure because it evaluates portfolio performance on the basis of return and diversification. |
| c. | The Treynor measure because it uses standard deviation as the risk measure. |
| d. | The Sharpe measure because it uses beta as the risk measure. |
| e. | None of the above. |
Answer:
Question: Components of overall portfolio performance include
| a. | Selectivity. |
| b. | Managers risk. |
| c. | Security risk. |
| d. | Choices a and b. |
| e. | Choices a, b and c. |
Answer:
Question: A portfolios gross selectivity is made up of
| a. | Managers risk. |
| b. | Net selectivity. |
| c. | Diversification. |
| d. | Choices a and b. |
| e. | Choices b and c. |
Answer:
Question: Bailey, Richards, and Tierney maintain that any useful benchmark should have the following characteristics.
| a. | Measurable. |
| b. | Investable. |
| c. | Value-weighted. |
| d. | Choices a and b. |
| e. | Choices a, b and c. |
Answer:
Question: Which of the following statements concerning performance measures is false?
| a. | The Sharpe measure examines both unsystematic and systematic risk. |
| b. | The Treynor measure examines systematic risk. |
| c. | The Jensen measure examines systematic risk. |
| d. | All three measures examine both unsystematic and systematic risk. |
| e. | None of the above (that is, all statements are true) |
Answer:
Question: Which of the following statements about returns-based analysis or effective mix analysis is true?
| a. | This analysis compares the historical return pattern of the portfolio in question with the historical returns of various well-specified indexes. |
| b. | This analysis uses sophisticated quadratic programming techniques to indicate what styles or style combinations were most similar to the portfolios actual historical returns. |
| c. | This analysis is based on the belief that the portfolios current make-up will be a good predictor for the next periods returns. |
| d. | Choices a and b |
| e. | All of the above statements describe returns-based analysis or effective mix analysis |
Answer:
Question: A managers superior returns could have occurred due to:
| a. | an insightful asset allocation strategy, over weighting an asset class that earned high returns. |
| b. | investing in undervalued sectors. |
| c. | selecting individual securities that earned above average returns. |
| d. | Choices a and c |
| e. | All of the above |
Answer:
Question: In the evaluation of bond portfolio performance, the policy effect refers to
| a. | The difference in portfolio duration and index duration. |
| b. | The extra return attributable to acquiring bonds that are temporarily mispriced relative to risk. |
| c. | To short-run changes in the portfolio during a specific period. |
| d. | The differential return from changing duration of the portfolio during a specific period. |
| e. | None of the above. |
Answer:
Question: In the evaluation of bond portfolio performance, the interest rate anticipation effect refers to
| a. | The difference in portfolio duration and index duration. |
| b. | The extra return attributable to acquiring bonds that are temporarily mispriced relative to risk. |
| c. | To short-run changes in the portfolio during a specific period. |
| d. | The differential return from changing duration of the portfolio during a specific period. |
| e. | None of the above |
Answer:
Question: In the evaluation of bond portfolio performance, the analysis effect refers to
| a. | The difference in portfolio duration and index duration. |
| b. | The extra return attributable to acquiring bonds that are temporarily mispriced relative to risk. |
| c. | To short-run changes in the portfolio during a specific period. |
| d. | The differential return from changing duration of the portfolio during a specific period. |
| e. | None of the above |
Answer:
Question: In the Grinblatt-Titman (GT) performance measure,
| a. | Portfolio performance is measured by assessing the quality of services provided by money managers by looking at adjustments made to the content of their portfolios. |
| b. | Portfolio performance is measured by examining both unsystematic and systematic risk. |
| c. | Portfolio performance is measured by comparing the returns of each stock in the portfolio to the return of a benchmark portfolio. With the same aggregate investment characteristics as the security in question. |
| d. | Portfolio performance is measured on the basis of return per unit of risk. |
| e. | Portfolio performance is measured on the basis of historic average differential return per unit of historic variability of differential return. |
Answer:
Question: In the Characteristic Selectivity (CS) performance measure,
| a. | Portfolio performance is measured by assessing the quality of services provided by money managers by looking at adjustments made to the content of their portfolios. |
| b. | Portfolio performance is measured by examining both unsystematic and systematic risk. |
| c. | Portfolio performance is measured by comparing the returns of each stock in the portfolio to the return of a benchmark portfolio. With the same aggregate investment characteristics as the security in question. |
| d. | Portfolio performance is measured on the basis of return per unit of risk. |
| e. | Portfolio performance is measured on the basis of historic average differential return per unit of historic variability of differential return. |
Answer:
Question: A more recent adjustment to the Sharpe measurement for portfolio evaluation is
| a. | To divide the portfolio risk premium by total risk rather than the portfolios beta. |
| b. | To divide the portfolio risk premium by standard deviation rather than the portfolios beta. |
| c. | To divide the portfolio risk premium by the excess portfolio return rather than total risk. |
| d. | To divide the excess portfolio return by the portfolios standard deviation. |
| e. | To divide the excess portfolio return by the portfolios beta. |
Answer:
Question: Which portfolio measurement uses the mean excess return in the numerator divided by the amount of residual risk that the investor incurred in pursuit of those excess returns?
| a. | Jensen measure. |
| b. | Fama measure. |
| c. | Sharpe measure. |
| d. | Treynor ratio. |
| e. | Information ratio. |
Answer:
Question: The cost of active management is the coefficient óER and it is sometimes referred to as
| a. | Market timing. |
| b. | Reward for risk. |
| c. | Excess reward. |
| d. | Excess risk. |
| e. | Tracking error. |
Answer:
Question: A disadvantage of the Treynor and Sharpe measures is that
| a. | They produce absolute performance rankings. |
| b. | The beta and standard deviation are static. |
| c. | They are both difficult to compute. |
| d. | They produce relative performance rankings. |
| e. | They give very different measurements for well-diversified portfolios. |
Answer:
Question: The Sortino measure differs from the Sharpe ratio in that
| a. | It measures the portfolios average return in excess of a user-selected minimum acceptable return threshold. |
| b. | It measures the downside risk in a portfolio. |
| c. | Higher values of the Sortino measure are not desirable, while higher values in the Sharpe ratio are desirable. |
| d. | Both a and b. |
| e. | All of the above. |
Answer:
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)
The portfolios identified below are being considered for investment. During the period under consideration Rf = .03.
| Portfolio | Return | Beta | ó |
| A | 0.16 | 1.0 | 0.15 |
| B | 0.22 | 1.5 | 0.10 |
| C | 0.11 | 0.6 | 0.08 |
| D | 0.18 | 1.1 | 0.12 |
NARREND
Question: Refer to Exhibit 25-1. Using the Sharpe Measure, which portfolio performed best?
| a. | A |
| b. | B |
| c. | C |
| d. | D |
| e. | Two portfolios are tied |
Answer:
Question: Refer to Exhibit 25-1. According to the Treynor Measure, which portfolio performed best?
| a. | A |
| b. | B |
| c. | C |
| d. | D |
| e. | Two portfolios are tied |
Answer:
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)
The portfolios identified below are being considered for investment. Assume that during the period under consideration Rf = .04.
| Portfolio | Return | Beta | ó |
| W | 0.18 | 1.8 | 0.06 |
| X | 0.21 | 0.9 | 0.10 |
| Y | 0.13 | 0.7 | 0.03 |
| Z | 0.16 | 1.5 | 0.07 |
NARREND
Question: Refer to Exhibit 25-2. Using the Sharpe Measure, which portfolio performed best?
| a. | W |
| b. | X |
| c. | Y |
| d. | Z |
| e. | Two portfolios are tied |
Answer:
Question: Refer to Exhibit 25-2. According to the Treynor Measure, which portfolio performed best?
| a. | W |
| b. | X |
| c. | Y |
| d. | Z |
| e. | Two portfolios are tied |
Answer:
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)
Consider the data presented below on three mutual funds and the market.
| Standard | ||||
| Fund | Beta | Deviation (%) | Return (%) | Rf (%) |
| AAA | 0.75 | 7.0 | 14 | 3 |
| BBB | 1.05 | 5.0 | 18 | 3 |
| CCC | 0.89 | 8.0 | 20 | 3 |
| Market | 1.00 | 8.0 | 12 | 3 |
NARREND
Question: Refer to Exhibit 25-3. Compute the Sharpe Measure for the AAA fund.
| a. | 4.49 |
| b. | 2.74 |
| c. | 1.57 |
| d. | 1.70 |
| e. | 1.27 |
Answer:
Question: Refer to Exhibit 25-3. Compute the Jensen Measure for the BBB fund.
| a. | 4.49 |
| b. | 2.74 |
| c. | 4.25 |
| d. | 5.55 |
| e. | 8.99 |
Answer:
Question: Refer to Exhibit 25-3. Compute the Treynor Measure for the CCC fund.
| a. | 14.7 |
| b. | 15.3 |
| c. | 19.1 |
| d. | 17.0 |
| e. | 12.7 |
Answer:
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)
The data presented below has been collected at this point in time.
| Standard | ||||
| Fund | Beta | Deviation (%) | Return (%) | Rf (%) |
| AAA | 1.05 | 4.98 | 16 | 6 |
| BBB | 1.00 | 4.04 | 15 | 6 |
| CCC | 0.92 | 3.13 | 11 | 6 |
| Market | 1.00 | 3.75 | 13 | 6 |
NARREND
Question: Refer to Exhibit 25-4. Compute the Sharpe Measure for the AAA fund.
| a. | 2.01 |
| b. | 2.74 |
| c. | 2.91 |
| d. | 5.43 |
| e. | 1.72 |
Answer:
Question: Refer to Exhibit 25-4. Compute the Jensen Measure for the BBB fund.
| a. | 2.10 |
| b. | 2.74 |
| c. | 5.43 |
| d. | 2.00 |
| e. | 1.65 |
Answer:
Question: Refer to Exhibit 25-4. Compute the Treynor Measure for the CCC fund.
| a. | 5.43 |
| b. | 2.74 |
| c. | 2.19 |
| d. | 2.00 |
| e. | 1.65 |
Answer:
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)
The data presented below has been collected at this point in time.
| Standard | ||||
| Fund | Beta | Deviation (%) | Return (%) | Rf (%) |
| XXX | 1.07 | 5.13 | 19 | 6 |
| YYY | 1.02 | 4.28 | 17 | 6 |
| ZZZ | 0.86 | 3.52 | 12 | 6 |
| Market | 1.00 | 3.80 | 13 | 6 |
NARREND
Question: Refer to Exhibit 25-5. Compute the Sharpe Measure for the XXX fund.
| a. | 6.98 |
| b. | 2.35 |
| c. | 2.53 |
| d. | 3.86 |
| e. | 1.72 |
Answer:
Question: Refer to Exhibit 25-5. Compute the Jensen Measure for the YYY fund.
| a. | 6.98 |
| b. | 2.35 |
| c. | 2.53 |
| d. | 3.86 |
| e. | 1.72 |
Answer:
Question: Refer to Exhibit 25-5. Compute the Treynor Measure for the ZZZ fund.
| a. | 6.98 |
| b. | 2.35 |
| c. | 2.53 |
| d. | 3.86 |
| e. | 1.72 |
Answer:
Question: What is the Sharpe measure for the S&P 500 over the last ten years if the standard deviation was 8% and the return was 14%?
| a. | 1.55 |
| b. | 1.69 |
| c. | 1.75 |
| d. | 1.99 |
| e. | 2.09 |
Answer:
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)
Given the following information evaluate the performance of Cloud Incorporated (CI).
| RCI = 0.17 | BCI = 1.05 | Rf = 0.07 | Rm = 0.12 |
NARREND
Question: Refer to Exhibit 25-6. Calculate CIs overall performance.
| a. | 0.1225 |
| b. | 0.1000 |
| c. | 0.0525 |
| d. | 0.0475 |
| e. | 0.0325 |
Answer:
Question: Refer to Exhibit 25-6. Calculate CIs selectivity.
| a. | 0.1225 |
| b. | 0.1000 |
| c. | 0.0525 |
| d. | 0.0475 |
| e. | 0.0325 |
Answer:
Question: Refer to Exhibit 25-6. Calculate CIs risk.
| a. | 0.1225 |
| b. | 0.1000 |
| c. | 0.0525 |
| d. | 0.0475 |
| e. | 0.0325 |
Answer:
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)
Given the following information evaluate the performance of Tyler Incorporated (TI).
| RTI = 0.18 | BTI = 1.06 | Rf = 0.06 | Rm = 0.11 |
NARREND
[/cpmembership]
Question: Refer to Exhibit 25-7. Calculate TIs overall performance.
| a. | 0.0113 |
| b. | 0.1200 |
| c. | 0.0670 |
| d. | 0.0530 |
| e. | 0.0696 |
Answer:
Question: Refer to Exhibit 25-7. Calculate TIs selectivity.
| a. | 0.0113 |
| b. | 0.1200 |
| c. | 0.0687 |
| d. | 0.0530 |
| e. | 0.0696 |
Answer:
Question: Refer to Exhibit 25-7. Calculate TIs risk.
| a. | 0.0113 |
| b. | 0.1200 |
| c. | 0.0670 |
| d. | 0.0530 |
| e. | 0.0696 |
Answer:
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)
| Weights | |
| Policy | Actual |
| 50% stocks | 60% stocks |
| 50% bonds | 40% bonds |
| Returns | |
| Index | Actual |
| 8% stocks | 9% stocks |
| 5% bonds | 7% bonds |
NARREND
Question: Refer to Exhibit 25-8. Which of the following statements is true?
| a. | The portfolio manager earned an extra 0.3% because of a shift in allocation out of bonds and into stocks. |
| b. | The portfolio manager earned an extra 0.3% because of a shift in allocation out of stocks and into bonds. |
| c. | The portfolio manager earned an extra 6.5% because of a shift in allocation out of bonds and into stocks. |
| d. | The portfolio manager earned an extra 6.5% because of a shift in allocation out of stocks and into bonds. |
| e. | None of the above is a true statement. |
Answer:
Question: Refer to Exhibit 25-8. Which of the following statements is true?
| a. | Sector/security selection hurt the portfolio performance; returns were 1.4% less than if the manager invested the funds in stocks and bond indexes. |
| b. | Sector/security selection improved the portfolio performance by 1.4%; each sector return was higher than for index value. |
| c. | Sector/security selection hurt the portfolio performance; returns were 6.8% less than if the manager invested the funds in stocks and bond indexes. |
| d. | Sector/security selection improved the portfolio performance by 6.8%; each sector return was higher than for index return. |
| e. | None of the above is a true statement. |
Answer:
Question: Refer to Exhibit 25-9. Calculate the Sharpe Measure for each portfolio
| a. | A1 = 0.40, A2 = 0.31, A3 = 0.65, A4 = 0.66 |
| b. | A1 = 0.31, A2 = 0.66, A3 = 0.65, A4 = 0.40 |
| c. | A1 = 0.66, A2 = 0.65, A3 = 0.31, A4 = 0.40 |
| d. | A1 = 0.66, A2 = 0.31, A3 = 0.65, A4 = 0.40 |
| e. | None of the above |
Answer:
Question: Refer to Exhibit 25-9. Calculate the Jensen alpha Measure for each portfolio
| a. | A1 = 0.014, A2 = −0.002, A3 = 0.002, A4 = −0.02 |
| b. | A1 = 0.002, A2 = −0.02, A3 = 0.002, A4 = −0.014 |
| c. | A1 = 0.02, A2 = −0.002, A3 = 0.002, A4 = −0.014 |
| d. | A1 = 0.02, A2 = −0.002, A3 = 0.02, A4 = −0.14 |
| e. | None of the above |
Answer:
Question: Refer to Exhibit 25-9. Calculate the Treynor Measure for each portfolio
| a. | A1 = 0.0625, A2 = 0.0778, A3 = 0.0818, A4 = 0.096 |
| b. | A1 = 0.096, A2 = 0.0778, A3 = 0.0818, A4 = 0.0625 |
| c. | A1 = 0.096, A2 = 0.0818, A3 = 0.0778, A4 = 0.0625 |
| d. | A1 = 0.0778, A2 = 0.096, A3 = 0.0818, A4 = 0.0625 |
| e. | None of the above |
Answer:
Question: Refer to Exhibit 25-10. Calculate the percentage return that can be attributed to the asset allocation decision.
| a. | 0.105% |
| b. | 0.925% |
| c. | 0.20% |
| d. | 0.96% |
| e. | 0.94% |
Answer:
Question: Refer to Exhibit 25-10. Calculate the percentage return that can be attributed to the security selection decision.
| a. | 0.105% |
| b. | 0.925% |
| c. | 0.20% |
| d. | 0.96% |
| e. | 0.94% |
Answer:
Question: A portfolio manager has the following sequence of cash flows over a two year period.
| Time | 0 | 1 | 2 |
| outflows | −$2,000 | −$500 | |
| inflows | $50 | $3,090 |
Calculate the portfolio managers dollar weighted return.
| a. | 13.56% |
| b. | 11.48% |
| c. | 15.50% |
| d. | 8.75% |
| e. | 10.67% |
Answer:
Question: A portfolio manager has the following sequence of cash flows over a two year period.
| Market Value before | Market Value after | ||
| Time | cash flow | Cash In | cash flow |
| 0 | $0 | $3,000 | $3,000 |
| 1 | $3,200 | $1,950 | $5,150 |
| 2 | $6,000 | −$90 | $5,910 |
Calculate the portfolio managers time weighted return.
| a. | 13.56% |
| b. | 11.48% |
| c. | 15.50% |
| d. | 8.75% |
| e. | 10.67% |
Answer:
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)
The last years performance for four mutual funds is presented below. The market return was 10.70%, last year with a standard deviation of 13.1% and the risk-free rate of return was 5%.
| Standard | |||
| Fund | Beta | Deviation (%) | Return (%) |
| A | 1.50 | 18.95 | 12.5 |
| B | 1.20 | 12.41 | 13.0 |
| C | 0.90 | 9.30 | 11.2 |
| D | 0.50 | 8.10 | 9.5 |
NARREND
Question: Refer to Exhibit 25-11. Compute the Sharpe Measure for the A fund.
| a. | 0.012 |
| b. | 0.040 |
| c. | 0.069 |
| d. | 0.396 |
| e. | 1.142 |
Answer:
Question: Refer to Exhibit 25-11. Compute the Jensen Measure for the B fund.
| a. | 1.16% |
| b. | 2.31% |
| c. | 6.90% |
| d. | 9.60% |
| e. | 10.13% |
Answer:
Question: Refer to Exhibit 25-11. Compute the Treynor Measure for the C fund.
| a. | 0.012 |
| b. | 0.040 |
| c. | 0.069 |
| d. | 0.396 |
| e. | 1.142 |
Answer:
Question: Refer to Exhibit 25-11. Based on the Sharpe Measure, which portfolio preformed best?
| a. | A |
| b. | B |
| c. | C |
| d. | D |
| e. | Market |
Answer:
Question: Refer to Exhibit 25-11. Based on the Treynor Measure, which portfolio preformed best?
| a. | A |
| b. | B |
| c. | C |
| d. | D |
| e. | Market |
Answer: