Calculate : M-squared measure T-squared measure, and Appraisal ratio (information ratio) Fund Average return Standard Deviation Beta coefficient Unsystematic Risk A 0.240 0.220 0.800 0.017 B 0.200 0.170 0.900 0.450 C 0.290 0.380 1.200 0.074 D 0.260 0.290 1.100 0.026 E 0.180 0.400 0.900 0.121 F 0.320 0.460 1.100 0.153 G 0.250 0.190 0.700 0.120 Market 0.220 0.180 1.000 0.000 Risk free return 0.050 0.000

Calculate : M-squared measure T-squared measure, and Appraisal ratio (information ratio) Fund Average return Standard Deviation Beta coefficient Unsystematic Risk A 0.240 0.220 0.800 0.017 B 0.200 0.170 0.900 0.450 C 0.290 0.380 1.200 0.074 D 0.260 0.290 1.100 0.026 E 0.180 0.400 0.900 0.121 F 0.320 0.460 1.100 0.153 G 0.250 0.190 0.700 0.120 Market 0.220 0.180 1.000 0.000 Risk free return 0.050 0.000

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter5: Evaluating Operating And Financial Performance

Section: Chapter Questions

Problem 6DQ

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calculate the following Sharpe Ratio (SP) Treynor Measure Jensen Measure M2 measure T2 measure Information Ratio (appraisal ratio) Fund Average return Standard Deviation Beta coefficient Unsystematic Risk A 0.240 0.220 0.800 0.017 B 0.200 0.170 0.900 0.450 C 0.290 0.380 1.200 0.074 D 0.260 0.290 1.100 0.026 E 0.180 0.400 0.900 0.121 F 0.320 0.460 1.100 0.153 G 0.250 0.190 0.700 0.120 Market 0.220 0.180 1.000 0.000 Risk free return 0.050 0.000
calculate the following M-squared measureT-squared measure, andAppraisal ratio (information ratio) Fund Average return Standard Deviation Beta coefficient Unsystematic Risk A 0.240 0.220 0.800 0.017 B 0.200 0.170 0.900 0.450 C 0.290 0.380 1.200 0.074 D 0.260 0.290 1.100 0.026 E 0.180 0.400 0.900 0.121 F 0.320 0.460 1.100 0.153 G 0.250 0.190 0.700 0.120 Market 0.220 0.180 1.000 0.000 Risk free return 0.050 0.000 Out of the performance measures you calculated in part a., which one would you use undereach of the following circumstances:i. You want to select one of the funds as your risky portfolio.ii. You want to select one of the funds to be mixed with the rest of your portfolio,currently composed solely of holdings in the market-index fund.iii. You want to select one of the funds to form an actively managed stock portfolio
a. Using the data in the table below alculate the following performance measures.i. Sharpe ratioii. Treynor measureiii. Jensen’s alphaiv. M-squared measurev. T-squared measure, andvi. Appraisal ratio (information ratio) Fund Average return Standard Deviation Beta coefficient Unsystematic Risk A 0.240 0.220 0.800 0.017 B 0.200 0.170 0.900 0.450 C 0.290 0.380 1.200 0.074 D 0.260 0.290 1.100 0.026 E 0.180 0.400 0.900 0.121 F 0.320 0.460 1.100 0.153 G 0.250 0.190 0.700 0.120 Market 0.220 0.180 1.000 0.000 Risk free return 0.050 0.000 b. Out of the performance measures you calculated in part a., which one would you use undereach of the following circumstances:i. You want to select one of the funds as your risky portfolio.ii. You want to select one of the funds to be mixed with the rest of your portfolio,currently composed solely of holdings in the market-index fund.iii. You want to select one of the funds to form an actively managed stock portfolio
Calculate: Information Ratio (appraisal ratio) Fund Average return Standard Deviation Beta coefficient Unsystematic Risk A 0.240 0.220 0.800 0.017 B 0.200 0.170 0.900 0.450 C 0.290 0.380 1.200 0.074 D 0.260 0.290 1.100 0.026 E 0.180 0.400 0.900 0.121 F 0.320 0.460 1.100 0.153 G 0.250 0.190 0.700 0.120 Market 0.220 0.180 1.000 0.000 Risk free return 0.050 0.000
Calculate : M2 measure T2 measure Information Ratio (appraisal ratio) Fund Average return Standard Deviation Beta coefficient Unsystematic Risk A 0.240 0.220 0.800 0.017 B 0.200 0.170 0.900 0.450 C 0.290 0.380 1.200 0.074 D 0.260 0.290 1.100 0.026 E 0.180 0.400 0.900 0.121 F 0.320 0.460 1.100 0.153 G 0.250 0.190 0.700 0.120 Market 0.220 0.180 1.000 0.000 Risk free return 0.050 0.000
The output below e penerted from regreseing Fund As exess returns on wkets excees retume (8AP S00). Kiatimate Glet Pavelue intercept L0.000 o.0077 1.2767 0.2066 Market index 1.3258 0.2157 6.1451 0.0000 Adj Reg lObservatione o.3830 so How well does CAPM explain the retume on Fund A? O Expleine over 30% of the variation in Fund A's excess returns O Explains over 60% ofr the variation in Fund A's excess returns O Explains below 20% of the varlation in Fund A's excess returns O Explains below 30% of the variation in Fund A's excess returns
Provide a descriptive formula for each of the following (e.g., Total risk =?+?): a. Total risk= b. Discount rate= c. Adjusted NPV=
The expected value, standard deviation of returns, and coefficient o below.) \table[[Asset A],[Possible Outcomes,Probability,Returns (%)
Coefficient of Variation A standardized measure of the risk per unit of return. Coefficient of Variation = Standard deviation () Expected return (ř) Coefficient of Variation FLI (11.80%/ 14.55%) 81.10% WEB (16.52%/22.00%) 75.10
Which of the following correctly orders the investment rules of average accounting return (AR), internal rate of return (IRR), and net present value (NPV) from the most desirable to the least desirable? a. IRR, AR, NPV. b. AR, IRR, NPV. c. NPV, AR, IRR. d. AR, NPV, IRR. e. NPV, IRR, AR.
Example: Risk-adjusted performance appraisal measures The data in the table below has been collected to appraise the performance of four asset management firms: Performance Appraisal Data Fund 1 Fund 2 Fund 3 Fund 4 Market Index Return 6.45% 8.96% 9.44% 5.82% 7.60% Beta 0.88 1.02 1.36 0.80 1.00 Standard deviation 2.74% 4.54% 3.72% 2.64% 2.80% The risk-free rate of return for the relevant period was 3%. Calculate and rank the funds using ex post alpha, Treynor measure, Sharpe ratio, and M².
Which of the following is NOT a profitability ratio? Select one:a. Return on Equityb. Net Profit Marginc. Return on Assetsd. Average Collection Period

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Fund	Average return	Standard Deviation	Beta coefficient	Unsystematic Risk
A	0.240	0.220	0.800	0.017
B	0.200	0.170	0.900	0.450
C	0.290	0.380	1.200	0.074
D	0.260	0.290	1.100	0.026
E	0.180	0.400	0.900	0.121
F	0.320	0.460	1.100	0.153
G	0.250	0.190	0.700	0.120
Market	0.220	0.180	1.000	0.000
Risk free return	0.050		0.000