MBA
Chap024

# Calculate the jensen measure of performance

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40. Calculate the Jensen measure of performance evaluation for Sooner Stock Fund. A. 2.6% B. 4.00% C. 8.67% D. 31.43% E. 37.14% a P = 20% - [3% + 1.8(11% - 3%)] = 2.6%. Difficulty: Moderate 41. Calculate the information ratio for Sooner Stock Fund. a P = 20% - [3% + 1.8(11% - 3%)] = 2.6%, 2.6% / 2.00% = 1.3. Difficulty: Moderate 24-23

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Chapter 24 - Portfolio Performance Evaluation The following data are available relating to the performance of Monarch Stock Fund and the market portfolio: The risk-free return during the sample period was 4%. 42. What is the information ratio measure of performance evaluation for Monarch Stock Fund? a P = 16% - [4% +1.15(12% - 4%)] = 2.8%; a P /s(e P ) = 2.8%/1% = 2.8, or 280%. Difficulty: Moderate 43. Calculate Sharpe's measure of performance for Monarch Stock Fund. (16 - 4)/ 26 = .46 Difficulty: Moderate 24-24
Chapter 24 - Portfolio Performance Evaluation 44. Calculate Treynor's measure of performance for Monarch Stock Fund. A. 10.40% B. 8.80% C. 44.00% D. 50.00% E. none of the above (16 - 4)/1.15 = 10.4 Difficulty: Moderate 45. Calculate Jensen's measure of performance for Monarch Stock Fund. 16 - [4 + 1.15 (12 - 4)] = 2.80% Difficulty: Moderate The following data are available relating to the performance of Seminole Fund and the market portfolio: The risk-free return during the sample period was 6%. 24-25

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Chapter 24 - Portfolio Performance Evaluation 46. If you wanted to evaluate the Seminole Fund using the M 2 measure, what percent of the adjusted portfolio would need to be invested in T-Bills? 22/30 = .7333 Difficulty: Moderate 47. Calculate the M 2 measure for the Seminole Fund. 22/30 = .7333; 1 - .7333 = .2667; M2 = [.7333 (18) + .2667 (6)] - 14 = 0.8%. Difficulty: Moderate 48. If the Seminole Fund is actively managed, fairly priced, and will be mixed with the market index portfolio, calculate the value of the measure that should be used for evaluation. A. 4.0% B. 20.0% C. 2.86% D. 0.8% E. 40% The Sharpe ratio is the correct measure to use in this case. (18 - 6) / 30 = 40% Difficulty: Difficult 24-26
Chapter 24 - Portfolio Performance Evaluation 49. If the Seminole Fund is actively managed and will be mixed with the market index portfolio, but you suspect it may be mispriced, calculate the value of the measure that should be used for evaluation. The information ratio is the correct measure to use in this case. AP=18% - [6% + 1.4 * (14% - 6%)] = 0.8%, Information Ratio = 0.8%/4.0% = .20 = 20% Difficulty: Difficult The following data are available relating to the performance of Wildcat Fund and the market portfolio: The risk-free return during the sample period was 7%.

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• Spring '10
• HAMZA
• Valuation, Portfolio Performance Evaluation

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