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Consider a client with a 10% return objective. A financial adviser creates a policy statement for that client, identifies relevant financial securities that fit the risk return profile for this client, and drafts an optimal asset allocation using specialized optimization techniques. After one year, the financial adviser's recommendations produce a return of 10%. Question: Is this client satisfied with the performance of the portfolio?

Consider the following bootstrapped 3-year performance of an actively managed investor's portfolio and a relevant benchmark: Investor's Portfolio Benchmark Portfolio Iteration Portfolio Value Portfolio Portfolio Value Portfolio Return t=3 Return p.a. t=3 р.а. 1 1.3 9.1% 1.2 6.3% 0.9 -3.5% 0.9 -3.5% 3 0.9 -3.5% 0.8 -7.2% 4 1.2 6.3% 1.1 3.2% 5 1.3 9.1% 1.2 6.3% What is the tracking error of investor's portfolio relative to the benchmark (compounded outperformance) over 3 years (rounded to one decimal place)? Select one: O a. 1.4% ОБ. 2.7% O. 4.5% O d. 4.6% O e. None of the above

During a particular investment period, a wealth management company held an investment portfolio that earned an average return of 13% with standard deviation of 30% and beta of 1.5.  The average risk-free rate of return during this investment period was 2%. (full process)   (a)     Calculate the Sharpe and Treynor measures of performance evaluation for this investment portfolio.                                                 This investment portfolio is composed of the following two asset classes:  Asset Class Weight Return Equity 0.80 15% Bonds 0.20 5%           During this particular investment period, the information on a benchmark portfolio is given in the following table. Asset Class Weight Return Equity (S&P500 Index) 0.50 17% Bonds (Lehman Brothers Index) 0.50 5%   (b)     Determine whether the investment portfolio of the wealth management company performed better than the benchmark portfolio in terms of the total…

You are evaluating the performance of two portfolio managers, and you have gathered annual return data for the past decade: Year Manager X Return (%) Manager Y Return (%) 1 -1.5 -6.5 -1.5 -3.5 3 -1.5 -1.5 4 -1.0 3.5 5 0.0 4.5 4.5 6.5 7 6.5 7.5 8 8.5 8.5 13.5 12.5 10 18.5 14.5 a. For each manager, calculate (1) the average annual return, (2) the standard deviation of returns, and (3) the semi-deviation of returns. Do not round intermediate calculations. Round your answers to two decimal places. Average annual return Standard deviation of returns Semi-deviation of returns Manager X % % % Manager Y % % % b. Assuming that the average annual risk-free rate during the 10-year sample period was 3.0%, calculate the Sharpe ratio for each portfolio. Based on these computations, which manager appears to have performed the best? Do not round intermediate calculations. Round your answers to three decimal places. Sharpe ratio (Manager X): Sharpe ratio (Manager Y): Based on Sharpe ratio -Select- )…

Question One Xuemeihas been managing five portfolios for the last year. She has collected the following information and has begun to make several calculations for five two stock portfolios: 1 2 3 4 5 a) b) c) rate of return on NCP = 12% rate of return on NAB = 10% standard deviation of NCP = 15% standard deviation of NAB = 19% covariance = 0.0064 Portfolio Weight in NAB Portfolio Returns 30% 40% 60% 55% 20% Portfolio Variance Portfolio Standard Deviation 3 Assist Xuemei by finishing the calculations for her. That is, complete the missing figures in the table above. Explain to Xuemei why the portfolio standard deviation is not simply the weighted average of the standard deviation of the stocks in the portfolio. Find the weight for NAB that would result in the lowest portfolio variance. Do not restrict your enquiry to the five portfolios.

You are evaluating the performance of two portfolio managers, and you have gathered annual return data for the past decade:   Year Manager X Return (%) Manager Y Return (%) 1   -2.5   -6.5   2   -2.5   -5.5   3   -2.5   -2.0   4   -2.0   4.0   5   0.0   5.5   6   5.5   6.5   7   7.5   7.5   8   9.5   8.5   9   13.5   12.5   10   18.5   14.5     For each manager, calculate (1) the average annual return, (2) the standard deviation of returns, and (3) the semi-deviation of returns. Do not round intermediate calculations. Round your answers to two decimal places.     Average annual return Standard deviation of returns Semi-deviation of returns Manager X   %   %   % Manager Y   %   %   %   Assuming that the average annual risk-free rate during the 10-year sample period was 1.0%, calculate the Sharpe ratio for each portfolio. Based on these computations, which manager appears to have performed the best? Do not round intermediate calculations. Round your…

In a perfect world where asset return is normally distributed. We have risk and return characteristics of following assets below: Assets ABC DEF Market portfolio Expected Return 10% 15% 5% Standard Deviation 20% 40% 10% Correlation coefficient with market 0.6  0.2  1 Weight 60% 40% 0% If market return increase by 5% this month, what is the change in expected portfolio return of the same month in PERCENTAGE?

A portfolio management organization analyzes 75 stocks and constructs a mean-variance efficient portfolio that is constrained to these 75 stocks. How many estimates of expected returns, variances and covariances are needed to optimize this portfolio? (Using Markowitz Model) 75, 150, 2625 75, 75, 2700 75, 75, 2775 75, 75, 2925 75, 150, 2775.

An investor recorded the following annual returns of one of his investments. You are required to calculate and comment on; 1. Mean return. 2. Variance and standard deviation of the return. 3. Geometric return.     Year 2016 2017 2018 2019 2020 Return 15% 17% 19% 10% -5%

Consider an equal-weighted portfolio that comprises two assets: A and B. The monthly 20. returns for each asset for the first four months of the year are given below. Month 1 Month 2 Month 3 Month 4 Asset A return 5% -2% -3% -6% Asset B return 4% 1% ? 2% If the effective annual rate of return on the equal- weighted portfolio calculated from the geometric sum of monthly portfolio returns is 13.49%, what is the Month 3 return for asset B? Please explain in detail the rationale behind each step.

Set up the complete formula for Dollar Weighted Return (DWR) for the following portfolio including final value of the portfolio. Year 0 1 2 3 4 Actions at the ending of the year (Yr0)Starting with $1000 (Yr1)Adding $100 (Yr2)Withdrawing $200 (Yr3)Adding $300 (Yr4)Ending Value = ? ROR during each Yr (Yr0) - (Yr1) 8% (Yr2)-4% (Yr3) 9% (Yr4) 3% A. Calculate the time weighted return (TWR) Complete Questions with respect to Excel

5. You are evaluating the performance of two portfolio managers, and you have gathered annual return data for the past decade: Manager X Return (%) Manager Y Return (%) Year -6.5 -1.5 -1.5 -3.5 -1.5 3 -1.5 4 -1.0 3.5 0.0 4.5 4.5 6.5 6.5 7.5 8.5 8.5 13.5 12.5 10 17.5 13.5 a. For each manager, calculate (1) the average annual return, (2) the standard deviation of returns, and (3) the semi-deviation of returns. b. Assuming that the average annual risk-free rate during the 10-year sample period was 1.5 percent, calculate the Sharpe ratio for each portfolio. Based on these computations, which manager appears to have performed the best? c. Calculate the Sortino ratio for each portfolio, using the average risk-free rate as the minimum acceptable return threshold. Based on these computations, which manager appears to have performed the best? d. When would you expect the Sharpe and Sortino measures to provide (1) the same per- formance ranking or (2) different performance rankings? Explain.

Xuemeihas been managing five portfolios for the last year. She has collected the following information and has begun to make several calculations for five two stock portfolios: 1 2 3 4 5 a) b) c) rate of return on NCP = 12% rate of return on NAB = 10% standard deviation of NCP = 15% standard deviation of NAB = 19% covariance = 0.0064 Portfolio Weight in NAB Portfolio Returns 30% 40% 60% 55% 20% Portfolio Variance Portfolio Standard Deviation 3 Assist Xuemei by finishing the calculations for her. That is, complete the missing figures in the table above. Explain to Xuemei why the portfolio standard deviation is not simply the weighted average of the standard deviation of the stocks in the portfolio. Find the weight for NAB that would result in the lowest portfolio variance. Do not restrict your enquiry to the five portfolios.

Consider the following historical performance data for two different portfolios, the Standard and Poor's 500, and the 90-day T-bill. Investment Average Rate of Standard Vehicle Return Deviation Beta R2 Fund 1 27.80% 22.30% 1.273 0.763 Fund 2 13.38 14.60 0.860 0.690 S&P 500 15.37 13.90 90-day T-bill 6.60 0.70 a. Calculate the Fama overall performance measure for both funds. Round your answers to two decimal places. Overall performance (Fund 1): % Overall performance (Fund 2): % b. What is the return to risk for both funds? Do not round intermediate calculations. Round your answers to two decimal places. Return to risk (Fund 1): % Return to risk (Fund 2): % c. For both funds, compute the measures of (1) selectivity, (2) diversification, and (3) net selectivity. Do not round intermediate calculations. Round your answers to two decimal places. Use a minus sign to enter negative values, if any. Selectivity Diversification Net selectivity Fund 1 % % Fund 2 % % d. Explain the meaning of the…

Xuemeihas been managing five portfolios for the last year. She has collected the following information and has begun to make several calculations for five two stock portfolios: 1 2 3 4 5 a) rate of return on NCP = 12% rate of return on NAB = 10% standard deviation of NCP = 15% standard deviation of NAB = 19% covariance = 0.0064 Portfolio Weight in NAB Portfolio Returns 30% 40% 60% 55% 20% Portfolio Variance Portfolio Standard Deviation 3 Assist Xuemei by finishing the calculations for her. That is, complete the missing figures in the table above.

You have been asked for your advice in selecting a portfolio of assets and have been supplied with the following data:. You have been told that you can create two portfolios-one consisting of assets A and B and the other consisting of assets A and C-by investing equal proportions (50%) in each of the two component assets. a. What is the average expected return, r, for each asset over the 3-year period? b. What is the standard deviation, s, for each asset's expected return? c. What is the average expected return, rp, for each of the portfolios? d. How would you characterize the correlations of returns of the two assets making up each of the portfolios identified in part c? e. What is the standard deviation of expected returns, Sp, for each portfolio? f. What would happen if you constructed a portfolio consisting of assets A, B, and C, equally weighted? Would this reduce risk or enhance return?

Asset A B C Cost $35,000 $36,000 $39,000 $10,000 Beta at purchase 0.79 0.96 1.49 1.32 Yearly income $1,600 $1,500 SO $250 Value today $35,000 $37,000 $45,500 $10,500

Example 9: What is the portfolio standard deviation for a two-asset portfolio comprised of the following two assets if the correlation of their returns is 0.5? Asset A Asset B Expected return Stańdard deviation of expected returns 10% 20% 5% 20% Amount invested 740,000 760,000

Analytical VaR Use the table below at the given level of accuracy: Critical values for VaR calculations. a Za 10% -1.282 5 -1.645 1 -2.326 Diamond Inc. is an investment company. One of its portfolios has a current market value of $25,000,000 and its returns follow a normal distribution with a mean of 8% and a standard deviation of 16% per year. At a 90% confidence level a. What is the portfolio VaR? $ Number Round your answer to the dollar. Do NOT use negative sign! b. What is the the minimum value of the portfolio during the next year? $ Number Round your answer to the dollar c. What is the portfolio ES? $ Number Round your answer to the dollar. Do NOT use negative sign!

Remember, the expected value of a probability distribution is a statistical measure of the average (mean) value expected to occur during all possible circumstances. To compute an asset's expected return under a range of possible circumstances (or states of nature), multiply the anticipated return expected to result during each state of nature by its probability of occurrence. Consider the following case: Aaron owns a two-stock portfolio that invests in Happy Dog Soap Company (HDS) and Black Sheep Broadcasting (BSB). Three-quarters of Aaron's portfolio value consists of HDS's shares, and the balance consists of BSB's shares. Each stock's expected return for the next year will depend on forecasted market conditions. The expected returns from the stocks in different market conditions are detailed in the following table: Market Condition Probability of Occurrence 0.20 0.35 0.45 Strong Normal Weak Happy Dog Soap 17.5% 10.5% -14% • The expected rate of return on Happy Dog Soap's stock over…

uppose the average return on Asset A is 7.1 percent and the standard deviation is 8.3 percent, and the average return and standard deviation on Asset B are 4.2 percent and 3.6 percent, respectively. Further assume that the returns are normally distributed. Use the NORMDIST function in Excel® to answer the following questions.   a. What is the probability that in any given year, the return on Asset A will be greater than 12 percent? Less than 0 percent? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the probability that in any given year, the return on Asset B will be greater than 12 percent? Less than 0 percent? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) c-1. In a particular year, the return on Asset A was −4.38 percent. How likely is it that such a low return will recur at some point in the future? (Do not round…

You are going to invest $20,000 in a portfolio consisting of assets X, Y, and Z, as follows: Asset Annual Return Probability Beta Proportion X 10% 0.50 1.2 0.333 Y 8% 0.25 1.6 0.333 Z 16% 0.25 2.0 0.333 Given the information in Table 5.2, The beta of the portfolio in Table 8.2, containing assets X, Y, and Z is ________.   Select one: a. 1.6 b. 2.0 c. 1.5 d. 2.4

Determine the expected standard deviation of a stock that an investment manager has determined that has three possible return outcomes over the next 12 months; -6.45%, 9.85% and 13.05%, for which she has assigned the following probabilities of occurring; 12.5%, 72.5% and 15.0% respectively  5.69%   8.87%   12.74%   0.32%

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OA Graphical derivation of beta A firm wishes to estimate graphically the betas for two assets, A and B. It has gathered the return data shown in the following table for the market portfolio and for both assets over the last 10 years, 2009-2018: a. Which of the following graphs represents the graphical derivation of beta for assets A and B? b. Use the characteristic lines from part a to estimate the betas for assets A and B. c. Use the betas found in part b to comment on the relative risks of assets A and B. a. Which of the following graphs represents the graphical derivation of beta for assets A and B? (Select the best answer below.) Asset Return (% Beta Derivation 20 15 20-150 540 15 20 -10- --15- Asset A Asset B 20 OC. Market Retum (%) Beta Derivation 20- 15 Asset Return (%) 10- 15 20 5 -10 -15 G -20 Asset A Asset B Market Return (%) b. Using the characteristic lines from part a, which of the following pairs of data represents the beta estimates for assets A and B? (Select the best…

1. We are attempting to compare the performance of two portfolio managers. Based on data gathered for the past five years, the following relevant information for these managers' portfolios have been obtained (summarized in the table). Note that the market risk premium (MRP) is 5%, and the risk-free rate is 3%. Ascertain what the equilibrium expected rate of return on each portfolio would have been, based on systematic risk. (9.5%; 6%) Portfolio Manager X Manager Y Actual Avg R 9.40% 6.50% o 10.00% 8.00% B 1.3 0.6 2. Using the information in the previous problem, calculate the "Alpha" for each of the portfolio managers for the five-year period under consideration. (-0.10%; +0.50%)