EBK FUNDAMENTALS OF CORPORATE FINANCE
9th Edition
ISBN: 9781260049237
Author: BREALEY
Publisher: MCGRAW HILL BOOK COMPANY
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Chapter 12, Problem 2QP
Summary Introduction
To discuss: Whether the fund is fully diversified.
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You have been given the following return information for a mutual fund, the market index, and the risk-free rate. You also know that the return correlation between the fund and the market is .97.
Year
Fund
Market
Risk-Free
2015
−18.20
%
−35.50
%
2
%
2016
25.10
20.60
5
2017
13.50
12.70
2
2018
6.80
8.40
6
2019
−1.86
−4.20
3
Calculate Jensen’s alpha for the fund, as well as its information ratio. (Do not round intermediate calculations. Enter the alpha as a percent rounded to 2 decimal places. Round the ratio to 4 decimal places.)
You have been given the following return information for a mutual fund, the market index, and the risk-free rate. You also know that the
return correlation between the fund and the market is 0.97.
1ITT
Market
Risk-Free
Year
Fund
2011
-21.8%
-41.5%
3%
2012
25.1
21.2
4
14.1
2013
14.5
8.8
2014
6.4
4
-2.22
2015
-5.2
What are the Sharpe and Treynor ratios for the fund? (Do not round intermediate calculations. Round your answers to 4 decimal
places.)
Sharpe ratio
Treynor ratio
You have been given the following return information for a mutual fund, the market index, and the risk-free rate. You also know that the
return correlation between the fund and the market is 0.97.
1TTT
Fund
Risk-Free
Market
Year
2011
-20.6%
-39.5%
2012
25.1
21.0
3
2013
13.9
13.9
2
2014
7.6
8.8
2015
-2.1
-5.2
2
What are the Sharpe and Treynor ratios for the fund? (Do not round intermediate calculations. Round your answers to 4 decimal
places.)
Sharpe ratio
Treynor ratio
Chapter 12 Solutions
EBK FUNDAMENTALS OF CORPORATE FINANCE
Ch. 12 - Prob. 1QPCh. 12 - Prob. 2QPCh. 12 - Prob. 3QPCh. 12 - Specific versus Market Risk. Figure 12.11 shows...Ch. 12 - Prob. 7QPCh. 12 - Prob. 8QPCh. 12 - Prob. 9QPCh. 12 - Prob. 10QPCh. 12 - Prob. 11QPCh. 12 - Prob. 12QP
Ch. 12 - Prob. 14QPCh. 12 - Prob. 15QPCh. 12 - Prob. 16QPCh. 12 - Prob. 17QPCh. 12 - Prob. 18QPCh. 12 - Prob. 19QPCh. 12 - Prob. 20QPCh. 12 - Prob. 21QPCh. 12 - Prob. 22QPCh. 12 - Prob. 23QPCh. 12 - Prob. 24QPCh. 12 - Prob. 25QPCh. 12 - Prob. 26QPCh. 12 - Prob. 27QPCh. 12 - Prob. 28QPCh. 12 - Prob. 29QPCh. 12 - Prob. 30QPCh. 12 - Prob. 31QPCh. 12 - Prob. 32QPCh. 12 - Prob. 33QPCh. 12 - Prob. 34QP
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- You have been given the following return information for a mutual fund, the market index, and the risk-free rate. You also know that the return correlation between the fund and the market is .97. Year 2015 2016 2017 2018 2019 Fund -17.0% Sharpe ratio Treynor ratio 25.1 13.3 6.4 -1.74 Market -33.5% 20.4 12.1 8.0 -3.2 Risk-Free 2% 6 2 5 3 What are the Sharpe and Treynor ratios for the fund? (Do not round intermediate calculations. Round your answers to 4 decimal places.)arrow_forwardYou have been given the following return information for a mutual fund, the market index, and the risk-free rate. You also know that the return correlation between the fund and the market is 0.97. Year 2018 Fund -16.4% Market -32.5% Risk-Free 3% 2019 25.1 20.3 4 2020 13.2 11.8 2 2021 2022 6.2 -1.68 8.0 -3.2 5 3 What are the Sharpe and Treynor ratios for the fund? Note: Do not round intermediate calculations. Round your answers to 4 decimal places. Sharpe ratio Treynor ratio 4arrow_forwardYou have been given the following return information for a mutual fund, the market index, and the risk-free rate. You also know that the return correlation between the fund and the market is 0.97. Year Fund Market Risk-Free 2018 -21.8% -41.5% 3% 2019 25.1 2020 14.1 2021 6.4 2022 -2.22 21.2 14.5 8.8 4 2 4 -5.2 3 What are the Sharpe and Treynor ratios for the fund? Note: Do not round intermediate calculations. Round your answers to 4 decimal places.arrow_forward
- You have been given the following return information for a mutual fund, the market index, and the risk-free rate. You also know that the return correlation between the fund and the market is 0.97. Year 2018 2019 2020 2021 2022 Fund -15.20% 25.10 13.00 7.40 -1.56 Market -30.50% 20.10 Jensen's alpha Information ratio 11.20 8.00 -3.20 Risk-Free 3% 4 Calculate Jensen's alpha for the fund, as well as its information ratio. Note: Do not round intermediate calculations. Enter the alpha as a percent rounded to 2 decimal places. Round the ratio to 4 decimal places. Answer is not complete. 3.77 %arrow_forwardYou have been given the following return information for a mutual fund, the market index, and the risk-free rate. You also know that the return correlation between the fund and the market is 0.89. Year 2018 Fund -21.20% Market -40.50% Risk-Free 2% 2019 25.10 21.10 4 2020 14.00 14.20 2 2021 6.20 2022 -2.16 8.80 -5.20 4 3 Calculate Jensen's alpha for the fund, as well as its information ratio. Note: Do not round intermediate calculations. Enter the alpha as a percent rounded to 2 decimal places. Round the ratio to 4 decimal places. Jensen's alpha Information ratio %arrow_forwardConsider the information below on 3 mutual funds: Fund Fund Return Beta S 14.05 % 1.19 D 17.05 % 1.44 M 13.65% 0.98 During the same time period, the return on the market stock index (rM) was 12.35% and the risk - free rate ( rRF) was 2.25%. Based on this information, which statement below is Correct? Group of answer choices After adjusting for risk, mutual fund S outperformed the other two funds. On a risk - adjusted basis, all of the mutual funds had a postive Alpha. After adjusting for risk, mutual fund M outperformed the other two funds. Mutual fund D had the best Treynor ratio for the period.arrow_forward
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