PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
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Textbook Question
Chapter 7, Problem 9PS
Average returns and standard deviation During the boom years of 2010–2014, ace mutual fund manager Diana Sauros produced the following percentage
Calculate the average return and standard deviation of Ms. Sauros’s mutual fund. Did she do better or worse than the market by these measures?
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Students have asked these similar questions
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?
Last year, two mutual funds, OHH and FLL, reported the same return and standard deviation, but OHH's beta was higher than FLL's beta. Based on the Sharpe measure, which mutual fund performed better last year?
A. FLL
B. OHH
C. They had the same performance.
D. Undetermined because their alphas are unknown.
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
−1.3
+23.9
+41.8
+10.8
+0.4
Market index
−0.6
+15.0
+31.3
+9.8
−0.8
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?
Chapter 7 Solutions
PRIN.OF CORPORATE FINANCE
Ch. 7 - Rate of return The level of the Syldavia market...Ch. 7 - Real versus nominal returns The Costaguana stock...Ch. 7 - Arithmetic average and compound returns Integrated...Ch. 7 - Risk premiums Here are inflation rates and U.S....Ch. 7 - Risk Premium Suppose that in year 2030, investors...Ch. 7 - Stocks vs. bonds Each of the following statements...Ch. 7 - Expected return and standard deviation A game of...Ch. 7 - Standard deviation of returns The following table...Ch. 7 - Average returns and standard deviation During the...Ch. 7 - Prob. 10PS
Ch. 7 - Prob. 11PSCh. 7 - Diversification Here are the percentage returns on...Ch. 7 - Risk and diversification In which of the following...Ch. 7 - Prob. 14PSCh. 7 - Portfolio risk To calculate the variance of a...Ch. 7 - Portfolio risk a) How many variance terms and how...Ch. 7 - Portfolio risk Table 7.8 shows standard deviations...Ch. 7 - Portfolio risk Hyacinth Macaw invests 60% of her...Ch. 7 - Stock betas What is the beta of each of the stocks...Ch. 7 - Stock betas There are few, if any, real companies...Ch. 7 - Portfolio betas A portfolio contains equal...Ch. 7 - Portfolio betas Suppose the standard deviation of...Ch. 7 - Portfolio risk Here are some historical data on...Ch. 7 - Portfolio risk Suppose that Treasury bills offer a...
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- You have been given the following return information for two mutual funds (Papa and Mama), the market index, and the risk-free rate. Year Papa Fund Mama Fund Market Risk-Free 2011 –12.6 % –22.6 % –24.5 % 1 % 2012 25.4 18.5 19.5 3 2013 8.5 9.2 9.4 2 2014 15.5 8.5 7.6 4 2015 2.6 –1.2 –2.2 2 Calculate the Sharpe ratio, Treynor ratio, Jensen’s alpha, information ratio, and R-squared for both funds. (Input all amounts as positive values. Do not round intermediate calculations. Enter all answers as a decimal value rounded to 4 decimal places.) PAPA MAMA SHARPE RATIO: TREYNOR RATIO JENSEN'S ALPHA INFORMATION RATIO R-SQUAREDarrow_forward"The following table gives the rate of return for a certain mutual fund from 2010 to 2014: Year Rate of Return 2010 -5.9% 2011 11.4% 2012 1.4% 2013 12.7% 2014 6.5% Compute the overall rate of return during this period. Round your answer to the nearest tenth of a percent."arrow_forwardUse the following data to answer the question regarding the performance of Guardian Stock Fund and the market portfolio. The risk-free return during the sample period was 4%. Guardian Market Portfolio Average return 14 % 10 % Standard deviation of returns 27 % 21 % Beta 1.5 1 Residual standard deviation 4 % 0 % Calculate the information ratio measure of performance for Guardian Stock Fund. (Round your answer to 2 decimal places. Do not round intermediate calculations.)arrow_forward
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- The following data relates to the portfolios of a fund’s two equity managers Total Return Beta Manager A 24 % 1.0 Manager B 30.0 % 1.5 S&P 500 21.0 Lehman 31.0 91 day Treasury bills 12.0 Calculate and compare the risk-adjusted performance of the two managers relative to each other and to the S&P 500. Explain the reasons why the conclusions drawn from this calculation may be misleading.arrow_forwardThe following data are available relating to the performacne of Long Horn Stock Fund and the market portfolio: Long Horn Market Portfolio Average return 19% 12% Standard Deviation of returns 35% 15% Beta 1.5 1.0 Residual standard deviation 3.0% 0.0% The risk-free return during the sample period was 4%. A. What is the sharpe measure of performance evaluation for long horn stock fund? B. What is the treynor measure of performance evaluation for long horn stock fund? C. Calculate the jensen measure of performance evaluation for long horn stock fund. D. Calculate the information ratio of performance evaluation for long horn stock fund.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 .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.)arrow_forward
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