Jordan Jones (JJ) and Casey Carter (CC) are portfolio managers at your firm. Each manages awell-diversified portfolio. Your boss has asked foryour opinion regarding their performance in thepast year. JJ’s portfolio has a beta of 0.6 and hada return of 8.5%; CC’s portfolio has a beta of 1.4and had a return of 9.5%. Which manager hadbetter performance? Why?
Q: James had an equity portfolio that contains $40,000 investment in Tesla (TSLA) and $60,000…
A: Value at risk: It is a measure of risk or probability of loss associated with an investment. It…
Q: You have been approached by Onua Do Ltd who wants to know how their portfolio is fairing. The…
A: Portfolio Standard Deviation is the standard deviation of the rate of return on an investment…
Q: Mr. Scared, a portfolio manager has a P10 million portfolio, which consist of P1 million invested in…
A: Risk free rate (Rf) = 5% Portfolio beta = 1.2 Market risk premium (Rm - Rf) = 6%
Q: Jamie Wong is thinking of building an investment portfolio containing two stocks, Land M. Stock L…
A: Actual Portfolio Return, Rp for 6 year- Rp= RL*WL + RM*WM 2013= (13*44%+23*56%) =18.6% 2014=…
Q: You are an analyst for a large public pension fund and you have been assigned the task of evaluating…
A: Financial statements are statements which states the business activities performed by the company .…
Q: John Davidson is an investment adviser at Leeds Asset Management plc. He is asked by a client to…
A: Sharpe Ratio = ( Expected rerturn - Risk free rate ) / Standard Deviation
Q: Big Rock has several investment portfolios with a local mutual fund company. One of the company's…
A: The formula for the calculation of Sharpe ratio is as follows: Sharpe ratio=Expected return on…
Q: Harry and Frank have been comparing their investment portfolios for several years. Harry claims that…
A: The variance and the standard deviation are the important indicators and tools for the variability…
Q: James had an equity portfolio that contains $40,000 investment in Tesla (TSLA) and $60,000…
A: Value At Risk is one the financial engineering tools, a risk manager employs for analyzing the risk…
Q: You are evaluating the performance of two portfolio managers, and you have gathered annual return…
A: Year Manager X Return (%) (xi-x_) (xi-x_)2 Manager Y Return (%) (yi-y_) (yi-y_)2 1 -2.5 -7 49 -6.5…
Q: Your client, Jane Hislop, has an investment portfolio which is 30% invested in Fund 1 and 70%…
A: The beta of a portfolio is nothing but the weighted average of betas of individual assets included…
Q: M4
A: Information ratio = Return of portfolio-Return of benchmarkTracking errorTracking error = Risk of…
Q: Mr. Scared, a portfolio manager has a P10 million portfolio, which consist of P1 million invested in…
A:
Q: Elsie is an investor considering investing in an actively managed equity fund. The Fund has a return…
A: Sharpe ratio is defined as the financial metric or ratio, which is mostly used by an investors at…
Q: a. John Wilson is a portfolio manager at Austin & Associates. For all of his clients, Wilson…
A: a) Efficient portfolio is a combination of assets to create a portfolio which gives highest expected…
Q: An investor holds a portfolio of stocks and is considering investing in the DBB Company. The firm's…
A: Hi, since you have posted a question with multiple sub-parts, we will answer the first 3 as per…
Q: A financial planner is examining the portfolios held by several of her clients. Which of the…
A: The standard deviation of portfolio represents how much the rate of return of a portfolio varies…
Q: A financial planner is examining the portfolios held by several of her clients. Identify which of…
A: Standard Deviation: It represents a measure of statistics that estimates the dispersion of a set of…
Q: You are evaluating the performance of two portfolio managers, and you have gathered annual return…
A: Honor code: Since multiple part question has been asked, therefore, as per our Q&A guidelines…
Q: You are an analyst for a large public pension fund and you have been assigned the task of evaluating…
A: a.Calculate the expected rate of return for Manager Y as follows:
Q: You are a financial investor who actively buys and sells in the securities market. Now you have a…
A: Given Investment in A = $7500 Investment in B = $4800 Investment in C = $5700 Investment in D =…
Q: weights of the assets in your portfolio
A: Note: Since you have posted a question with multiple sub-parts, we will solve the first three…
Q: You are evaluating the performance of two portfolio managers, and you have gathered annual return…
A: a. Formula for calculations: Mean = sum of all the values / total of values Variance = Sum of all…
Q: Big Rock has several investment portfolios with a local mutual fund company. One of the company's…
A: Portfolio management strategies are the different ways that may be used to manage a portfolio…
Q: Two stock investment advisers are comparing performance. The first averaged a 19% rate of return and…
A: r1=19%; β1=1.5 r2=16%; β2=1 a) To analyze which investor was a better selector of individual stocks,…
Q: You are an analyst for a large public pension fund and you have been assigned the task of evaluating…
A: Financial statements are statements which states the business activities performed by the company .…
Q: Assume you are a portfolio manager at JS Global Capital Ltd. Recently you came across three…
A: 1. Calculation of beta as compared to the market : Beta for each stock can be computed with the…
Q: Suppose, a passive portfolio, that is, one invested in a risky portfolio that mimics the DSE Broad…
A: Ans: (i) Currently the client has invested in active portfolio. So his expected return is 13% and…
Q: An investor holds a portfolio of stocks and is considering investing in the DBB Company. The firm’s…
A: Here,
Q: 1. What is the required rate of return on the initial P20M investment? 2. What is the rate of…
A: Formula used is as follows: Required rate of return = Rf + Beta * (Rm - Rf)
Q: You are examining a portfolio manager’s active investing portfolio. The portfolio has a beta of 2…
A: The expected return is the minimum required rate of return which an investor required from the…
Q: Assume you are a portfolio manager at JS Global Capital Ltd. Recently you came across three…
A: “Since you have posted a question with multiple sub-parts, we will solve the first three subparts…
Q: Assume you are a portfolio manager at JS Global Capital Ltd. Recently you came across three…
A: “Since you have posted a question with multiple sub-parts, we will solve first three sub-parts for…
Q: Alex Smith and Jane Green are portfolio managers at your firm. Each manages a well-diversified…
A: Calculation of Required Rate of Return using Capital Asset Pricing Model Using Capital Asset Pricing…
Q: Your Company's manager has a $40 million portfolio with a beta of 1.00. The risk-free rate is 4.25%,…
A:
Q: Consider a small cap value portfolio where the investment manager generates 0.26% of Carhart alpha.…
A: Jensen's alpha is a formula for calculating the risk-adjusted value of an investment. Jensen's alpha…
Q: An investor has $5,000 invested in a stock which has an estimated beta of 1.2, and another $15,000…
A: Required return of portfolio = risk free rate + (beta of portfolio * market risk premium) 15% = 6% +…
Q: As a junior investment manager, your boss instructs you to help a client to invest $100,000 for the…
A: We will first calculate the expected return of the portfolio by taking the weight proportionately…
Q: You are an active investor in the securities market and you have established an investment portfolio…
A: Given information: Portfolio of stock A is 45% For stock B is 55% Expected return for A is 12.5%,…
Q: A manager believes his firm will earn a return of 12.50 percent next year. His firm has a beta of…
A: As per CAPM model, required rate of return= Rf+ beta *(Rm- Rf) Rm= Market rate of return Rf= risk…
Q: Kunal Nayyar from California, had $50,000 in investments at the beginning of the year that consisted…
A: The question is based on the concept of calculation of return of a portfolio . Formula as:…
Q: Big Rock has several investment portfolios with a local mutual fund company. One of the company's…
A: Risk and return are the two different factors of an investment. Different investors have different…
Q: As the manager of Radboud Investments, LLC you are thinking of increasing your private investments.…
A: Given:
Q: An investment firm uses the Carhart-Fama-French Model to track the performance of the portfolio…
A: “Since you have posted a question with multiple sub-parts, we will solve first three subparts for…
Q: John Davidson is an investment adviser at Leeds Asset Management plc. He is asked by a client to…
A: sharpe ratio: sharpe ratio =rp-rfσpwhere,rp=return of portfoliorf=risk free rateσp=standard…
Q: You are an active investor in the securities market and you have established an investment portfolio…
A: Expected return of portfolio is given by E(A,B) = w(A)*r(A) + w(B)*r(B) Where, w(A) =weight…
Q: James had an equity portfolio that contains $40,000 investment in Tesla (TSLA) and $60,000…
A: The mathematical equation for computing: Note: Z Value of 97% confidence level is 2.17 (From Z…
Jordan Jones (JJ) and Casey Carter (CC) are
well-diversified portfolio. Your boss has asked for
your opinion regarding their performance in the
past year. JJ’s portfolio has a beta of 0.6 and had
a return of 8.5%; CC’s portfolio has a beta of 1.4
and had a return of 9.5%. Which manager had
better performance? Why?
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 2 images
- Alex Smith and Jane Green are portfolio managers at your firm. Each manages a well-diversified portfolio. Your boss has asked for your opinion regarding their performance in the past year. Alex’s portfolio has a beta of 0.8 and had a return of 9.5%; Jane’s portfolio has a beta of 1.6 and had a return of 11.5%. Which manager had better performance? Why? (Assumer the risk-free rate is 4% and the market risk premium is 5%).Please show all work and formulas in excel please! The Table for the problem is attached. Table below shows the historical returns for Companies A, B and C If one investor has a portfolio consisting of 50% Company A and 50% Company B, what are the average portfolio return and standard deviation? What is Sharpe ratio if the risk-free rate is 3.8%? If another investor has a portfolio consisting of 1/3 Company A, 1/3 Company B and 1/3 Company C, what are the average portfolio return and standard deviation? What is Sharpe ratio if the risk-free rate is 3.8% What would happen to the portfolio risk if more and more randomly selected stocks were added?During a particular year, the T-bill rate was 6%, the market return was 14%, and a portfolio manager with beta of .5 realized a return of 10%.a. Evaluate the manager based on the portfolio alpha.b. Reconsider your answer to part (a) in view of the Black-Jensen-Scholes finding that the security market line is too flat. Now how do you assess the manager’s performance?
- 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…An investment firm uses the Carhart-Fama-French Model to track the performance of the portfolio managers in the firm. In 2019, the risk-free rate of return was 2.2% and the return on the S&P 500 (a proxy for the total market) was 28.9%. An actively managed large cap portfolio earned 32.8%, while the benchmark portfolio it was compared to earned 31.2%. The betas for the benchmark portfolio and the actively managed portfolio are: Betas Risk Factor benchmark portfolio managed portfolio factor return Market risk (RMRF) 1.00 1.05 ? Small cap stocks (SMB) -0.50 -0.70 -5.90% Value stocks (HML) 0.20 0.40 -6.35% Momentum stocks (WML) 0.10 0.20 6.44% What is the active return on the managed portfolio? What is the factor return for market risk (RMRF)? What proportion of the active return is due to the market risk tilt? What proportion of the active return is due to the large cap stocks tilt (the tilt away from small cap…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 managing a stock portfolio for a client that contains three assets, A, B, C. You currently hold each in equal proportion and the portfolio has the following characteristics: Your client asks you to add a 4th asset to the portfolio. The new portfolio will hold all assets in equal proportion. You have identified a potential asset, X. Asset X has an expected return of 12%, a Std. deviation of 36% and a correlation with all other assets in the portfolio of 0. ) The expected return of the new portfolio is: ) The variance of the new portfolio is : )The standard deviation of the new portfolioJohn Davidson is an investment adviser at Leeds Asset Management plc. He is asked by a client to evaluate various investment opportunities currently available and he has calculated expected returns and standard deviations for five different well-diversified portfolios of risky assets: Portfolio Expected return Standard deviation Q 7.8% 10.5% R 10.0% 14.0% S 4.6% 5.0% T 11.7% 18.5% U 6.2% 7.5% (a) For each portfolio, calculate the risk premium per unit of risk (Sharpe ratio) that you expect to receive. Assume that the risk-free rate is 3.0%. (b) Using answers from a, which of these five portfolios is most likely to be the market portfolio and explain why. (200 words maximum) (c) If you are only willing to make an investment with a standard deviation of 7.0%, is it possible for you to earn a return of 7.0%? (d) What is the minimum level of risk that would be necessary for an investment to earn 7.0%? What is the composition of the…John Davidson is an investment adviser at Leeds Asset Management plc. He is asked by a client to evaluate various investment opportunities currently available and he has calculated expected returns and standard deviations for five different well-diversified portfolios of risky assets: Portfolio Expected return Standard deviation Q 7.8% 10.5% R 10.0% 14.0% S 4.6% 5.0% T 11.7% 18.5% U 6.2% 7.5% (a) For each portfolio, calculate the risk premium per unit of risk (Sharpe ratio) that you expect to receive. Assume that the risk-free rate is 3.0%. (b) Using answers from a, which of these five portfolios is most likely to be the market portfolio and explain why. (200 words maximum)
- John Davidson is an investment adviser at Leeds Asset Management plc. He is asked by a client to evaluate various investment opportunities currently available and he has calculated expected returns and standard deviations for five different well-diversified portfolios of risky assets: Portfolio Expected return Standard deviation Q 7.8% 10.5% R 10.0% 14.0% S 4.6% 5.0% T 11.7% 18.5% U 6.2% 7.5% (a) For each portfolio, calculate the risk premium per unit of risk (Sharpe ratio) that you expect to receive. Assume that the risk-free rate is 3.0%.a. John Wilson is a portfolio manager at Austin & Associates. For all of his clients, Wilson manages portfolios that lie on the Markowitz efficient frontier. Wilson asks Mary Regan, CFA, a managing director at Austin, to review the portfolios of two of his clients, the Eagle Manufacturing Company and the Rainbow Life Insurance Co. The expected returns of the two portfolios are substantially different. Regan determines that the Rainbow portfolio is virtually identical to the market portfolio and concludes that the Rainbow portfolio must be superior to the Eagle portfolio. Do you agree or disagree with Regan’s conclusion that the Rainbow portfolio is superior to the Eagle portfolio? Justify your response with reference to the capital market line.b. Wilson remarks that the Rainbow portfolio has a higher expected return because it has greater nonsystematic risk than Eagle’s portfolio. Define nonsystematic risk and explain why you agree or disagree with Wilson’s remark.James had an equity portfolio that contains $40,000 investment in Tesla (TSLA) and $60,000 investment in Microsoft (MSFT) since 2018. After seeing the stock market turmoil sparked by coronavirus, he contacted you and seek for some approaches to measure the expected losses of his portfolio. As his investment adviser, you decided to use the model building approach to measure the risk of James’ portfolio. By how much does diversification reduce the VaR?