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 retum. standard deviation, and CAPM beta estimates for these two managers over the past five years: Portfolio Actual Average Standard deviation Return 7.80% Beta Manager K Manager C 10.05% 0.75 12.0% 15.S0% 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 (ie., XX.Xx%)
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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. 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 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…In a recent 5-year period, mutual fund manager Diana Sauros produced the following percentage rates of return for the Mesozoic Fund. Rates of return on the market index are given for comparison. 1 2 3 4 5 Fund −1.3 +23.9 +41.8 +10.8 +0.4 Market index −0.6 +15.0 +31.3 +9.8 −0.8 a. Calculate (a) the average return on both the Fund and the index, and (b) the standard deviation of the returns on each. (Do not round intermediate calculations. Round your answers to 2 decimal places.) b. Did Ms. Sauros do better or worse than the market index on these measures?
- You are an advisor reviewing fund managers performance over the last year. Your records indicate that government bonds have returned 5% over the period. You have also obtained the following information: Return Standard deviation Beta Market portfolio 0.148 0.52 Fund manager W 0.148 0.36 0.18 Fund manager X 0.160 0.34 0.16 Fund manager Y 0.114 0.34 2.60 Fund manager Z 0.158 0.56 1.80 Given the information above, which fund manager’s performance shows it lies on the Capital Market Line? Fund manager W. Fund manager X. Fund manager Y. Fund manager Z.The following data relates to the portfolios of a fund’s two equity managers Total Return Beta Manager A 24 % 1.0 Manager B 30.0 % 1.5 S&P 500 21.0 Lehman 31.0 91 day Treasury bills 12.0 Calculate and compare the risk-adjusted performance of the two managers relative to each other and to the S&P 500. Explain the reasons why the conclusions drawn from this calculation may be misleading.(Using the CAPM to find expected returns) Sante Capital operates two mutual funds headquartered in Houston, Texas. The firm is evaluating the stock of four different firms for possible inclusion in its fund holdings. As part of their analysis, Sante's managers have asked their junior analyst to estimate the investor-required rate of return on each firm's shares using the CAPM and the following estimates: The rate of interest on short-term U.S. Treasury securities is currently 4 percent, and the expected return for the market portfolio is 10 percent. What should be the expected rates of return for each investment? Security Beta A 1.67 B 0.58 C 1.14 D 0.78 (Click on the icon in order to copy its contents into a spreadsheet.) Question content area bottom Part 1 a. The expected rate of return for security A, which has a beta of 1.67, is enter your response here%. (Round to two decimal places.) Part 2 b. The expected…
- An investor wants to select one of the following mutual funds for the coming year. Data showing the percentage annual return for each fund during five typical one-year periods are shown below. The assumption is that one of these five year periods will occur again during the coming year. Thus A, B, C, D and E are states of nature for the mutual fund decision. Outcomes Mutual Fund Year A Year B Year C Year D Year E Large Cap Stock 25.3 30.0 48.3 22.4 -19.8 Mid-Cap Stock 35.9 21.6 -9.9 62.3 -20.1 Small-Cap Stock 40.5 29.4 16.0 13.8 6.1 Energy Sector 35.4 23.2 -19.5 31.4 -12.2 Health Sector 49.1 5.5 89.5 70.4 -20.5 Tech Sector 46.2 37.2 46.9 40.5 -16.2 Real Estate Sector 18.9 35.0 -20.0 24.6 13.2 a) Assume the investor is conservative, what is the recommended fund?…The Retired Fund is an open-ended mutual fund composed of $500 million in U.S. bonds and U.S. Treasury bills. This fund has had a portfolio duration (including T-bills) of between 3 and 9 years. Retired has shown first-quartile performance over the past five years, as measured by an independent fixed-income measurement service. However, the directors of the fund would like to measure the market timing skill of the fund’s sole bond investor manager. An external consulting firm has suggested the following three methods:a. Method I examines the value of the bond portfolio at the beginning of every year, then calculates the return that would have been achieved had that same portfolio been held throughout the year. This return would then be compared with the return actually obtained by the fund.b. Method II calculates the average weighting of the portfolio in bonds and T-bills for each year. Instead of using the actual bond portfolio, the return on a long-bond market index and T-bill index…You are given the following information concerning several mutual funds: Fund Return in Excess of the Treasury Bill Rate Beta A 12.4% 1.14 B 13.2% 1.22 C 11.4% 0.90 D 9.8% 0.76 E 12.6% 0.95 During the time period, the Standard & Poor's stock index exceeded the Treasury bill rate by 10.5 percent (i.e., r(m) - r(f) = 10.5%) a. Rank the performance of each fund without adjusting for risk and adjusting for risk using the Treynor index. Which, if any, outperformed the market? (Remember, the beta of the market is 1.0.) b. The analysis in part (a) assumes each fund is sufficiently diversified so that the appropriate measure of risk is the beta coefficient. Suppose,…
- In a recent 5tear period, mutual fund manager Diana sharks produced the following percentage rates of return for the Mesozoic fund. Rates of return on the market index are given for comparison. A. Calculate the average return on both the fund and the index and the standard deviation of the returns on each. Did Ms. Sauros do better or worse than the market index on these measures?I need someone to check my answer In a recent 5-year period, mutual fund manager Diana Sauros produced the following percentage rates of return for the Mesozoic fund. Rates of return on the market index are given for comparison Year Fund Return (%) Standard deviation mean Deviation 2 Market index return (%) Standard Deviation (Mean) Deviation2 1 -1.4 -16.52 272.91 -0.5 -11.8 139.24 2 24.0 8.88 77.44 16.0 4.7 22.09 3 41.9 26.78 717.17 31.4 20.1 404.01 4 10.9 -4.22 17.81 9.9 -1.4 1.96 5 0.2 -14.92 222.61 -0.3 -11.6 134.56 TOTAL 75.6 1,307.94 56.5 701.86 AVERAGE 15.12 261.59 11.3 140.37 SD 16.17 11.85 Calculate The average return on Mesozoic Fund Return and Market Portfolio Return Fund return = (-1.4+24+41.9+10.9+0.2)/5 = 15.12 Market index return = -0.5+16+31.4+9.9+ (-0.3)]/5 =…As a fund manager in Bull & Bear Securities, you are given the following information regarding your portfolio. Rate of Return if State Occurs {:[" State of "],[" Economy "]:} {:[" Probability of "],[" State of Economy "]:} Stock A Stock B Stock C Boom .72 .06 .11 .17 Bust .28 .19 -.04 .23 Based on the above information, compute the following: i) The expected return in boom economy for all the three stocks. ii) The expected return in bust economy for all the three stocks. iii) The expected return for the portfolio that invest 30 percent each in A and B and 40 percent in C. iv) The standard