Suppose that during the most recent 10 year period, the average annual total rate ofreturn on the aggregate market portfolio, namely the All Ordinaries AccumulationIndex, was 12 per cent, its standard deviation was 10 per cent, and the averageannual risk free rate of return was 5 per cent. You are evaluating the following funds:FundBetaABсAverage AnnualRate of Return%1268b)c)0.901.051.20StandardDeviation %5.510.07.5a) Calculate the Jensen performance measure for each of the funds. Yourmethod of calculation must be clear.On the basis of the Jensen measure, which fund performed the worst?For Fund A, provide an interpretation of the Jensen performance measure youcalculated. Briefly explain.

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Suppose that during the most recent 10 year period, the average annual total rate of return on the aggregate market portfolio, namely the All Ordinaries Accumulation Index, was 12 per cent, its standard deviation was 10 per cent, and the average annual risk free rate of return was 5 per cent. You are evaluating the following funds: Fund Beta A B C b) c) Average Annual Rate of Return% 12 6 8 0.90 1.05 1.20 Standard Deviation % 5.5 10.0 7.5 a) Calculate the Jensen performance measure for each of the funds. Your method of calculation must be clear. On the basis of the Jensen measure, which fund performed the worst? For Fund A, provide an interpretation of the Jensen performance measure you calculated. Briefly explain.

Suppose that during the most recent 10 year period, the average annual total rate of return on the aggregate market portfolio, namely the All Ordinaries Accumulation Index, was 12 per cent, its standard deviation was 10 per cent, and the average annual risk free rate of return was 5 per cent. You are evaluating the following funds: Fund Beta A B C b) c) Average Annual Rate of Return% 12 6 8 0.90 1.05 1.20 Standard Deviation % 5.5 10.0 7.5 a) Calculate the Jensen performance measure for each of the funds. Your method of calculation must be clear. On the basis of the Jensen measure, which fund performed the worst? For Fund A, provide an interpretation of the Jensen performance measure you calculated. Briefly explain.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 5P

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