The total excess return on the aggie managed

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61. The total excess return on the Aggie managed portfolio was __________. A. 1% B. 3% C. 4% D. 5% E. none of the above 15% - 10% = 5%. Difficulty: Easy 62. The contribution of asset allocation across markets to the total excess return was See table below. Difficulty: Difficult 24-33
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Chapter 24 - Portfolio Performance Evaluation 63. The contribution of selection within markets to total excess return was See table below. Difficulty: Difficult 64. In measuring the comparative performance of different fund managers, the preferred method of calculating rate of return is __________. For the investor, the internal rate of return (or dollar-weighted rate of return) is the preferred measure because if the investor chooses to invest heavily in one investment vehicle that performs extremely well, an increased return results, which is reflected in A (or C). However, the mutual fund manager does not usually make the decision as to the amount to invest in a particular vehicle; therefore, the time-weighted rate of return is usually used to evaluate these managers. Arithmetic average is a good measure for estimating future returns (if expectations are unchanged). Difficulty: Easy 24-34
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Chapter 24 - Portfolio Performance Evaluation 65. The __________ measures the reward to volatility trade-off by dividing the average portfolio excess return by the standard deviation of returns. A. Sharpe measure B. Treynor measure C. Jensen measure D. information ratio E. none of the above The Sharpe measure is a measure of excess average portfolio returns over time per unit of total risk of the portfolio returns (standard deviation). Difficulty: Easy 66. A pension fund that begins with $500,000 earns 15% the first year and 10% the second year. At the beginning of the second year, the sponsor contributes another $300,000. The dollar-weighted and time-weighted rates of return, respectively, were $500,000 + $300,000/(1 + r) = $75,000/(1 + r) + $880,000/(1 + r) 2 ; r = 12.059%; (15 + 10)/2 = 12.5% Difficulty: Moderate 24-35
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Chapter 24 - Portfolio Performance Evaluation 67. The Value Line Index is an equally weighted geometric average of the returns of about 1,700 firms. The value of an index based on the geometric average returns of 3 stocks where the returns on the 3 stocks during a given period were 32%, 5%, and -10%, respectively, is __________. [(1.32)(1.05)(0.90)] 1/3 - 1.0 = 7.6%. Difficulty: Moderate
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  • Spring '10
  • HAMZA
  • Valuation, Portfolio Performance Evaluation

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