INVESTMENTS (LOOSELEAF) W/CONNECT
11th Edition
ISBN: 9781260465945
Author: Bodie
Publisher: MCG
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Chapter 4, Problem 14PS
Summary Introduction
(A)
To determine:
The question is whether future performance is predictable by using the past performance. That can be answered by finding the utility of historical information.
Summary Introduction
(B)
The question is whether future performance will persists by keeping cue of the bad past performance.
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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 -1.4 23.2 41.1 10.1 0.5
Market index -0.6 18.0 30.6 11.4 -0.4
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?
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?
The Performance Fund had returns of 19% over the evaluation period and the benchmark portfolio yielded a return of 17% over the same period. Over the evaluation period, the standard deviation of returns from the Fund was 23% and the standard deviation of returns from the benchmark portfolio was 21%. Assuming a risk-free rate of return of 8%, which one of the following is the calculation of the Sharpe index of performance for the fund over the evaluation period?
0.3913
0.4286
0.4783
0.5238
0.5870
Chapter 4 Solutions
INVESTMENTS (LOOSELEAF) W/CONNECT
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- 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 =…arrow_forwardIf you desire to forecast performance of a mutual fund for next year, the best forecast will be given by the a. geometric average return b. neither geometric average return nor arithmetic average return c. arithmetic average return d. both geometric average return and arithmetic average return You buy and hold a S&P 500 index fund. You always reinvest your dividends earned on the fund. Which method provides the best measure of the actual average historical performance of the investments you have chosen? a. both geometric average return and arithmetic average return b. neither geometric average return nor arithmetic average return c. arithmetic average return d. geometric average returnarrow_forwardYou 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,…arrow_forward
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