Q5. You are assigned a task to compare portfolios W, X, Y and Z. During the most recent 4-year period, the average annual rate of return on an aggregate market portfolio was 12%, and the average nominal rate of return on government T-bills was 5%. You also learned that the standard deviation of an annual rate of return for the market portfolio over the past 4 years was 5%. In order to compare the portfolios' performances, you need to compute each portfolio's risk-adjusted return and compare them against the market's risk-adjusted return. Portfolio Return Beta Standard Deviation W 0.17 1.3 X 0.11 1.0 Y 0.22 1.6 Z 0.15 0.9 0.04 0.05 0.10 0.05 Using the additional information provided in the table, answer the following questions. Compute the Sharpe measure for each portfolio and the market portfolio. Compute the Treynor measure for each portfolio and the market portfolio. Rank the portfolios using Sharpe and Treynor measures and explain the cause for any differences you find in the rankings. a. b. C. d. Compute the Jensen's alpha for Portfolio Y.

Q5. You are assigned a task to compare portfolios W, X, Y and Z. During the most recent 4-year period, the average annual rate of return on an aggregate market portfolio was 12%, and the average nominal rate of return on government T-bills was 5%. You also learned that the standard deviation of an annual rate of return for the market portfolio over the past 4 years was 5%. In order to compare the portfolios' performances, you need to compute each portfolio's risk-adjusted return and compare them against the market's risk-adjusted return. Portfolio Return Beta Standard Deviation W 0.17 1.3 X 0.11 1.0 Y 0.22 1.6 Z 0.15 0.9 0.04 0.05 0.10 0.05 Using the additional information provided in the table, answer the following questions. Compute the Sharpe measure for each portfolio and the market portfolio. Compute the Treynor measure for each portfolio and the market portfolio. Rank the portfolios using Sharpe and Treynor measures and explain the cause for any differences you find in the rankings. a. b. C. d. Compute the Jensen's alpha for Portfolio Y.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 15P

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