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In: Finance

The risk-free rate, S&P 500 index, and the average return, standard deviation, beta, and residual standard...

  1. The risk-free rate, S&P 500 index, and the average return, standard deviation, beta, and residual standard deviation for three funds are given.

Fund

Avg. Return

Std. Dev.

Beta

Residual Std. Dev.

A

B

C

S&P 500

Risk-free

18

25

22

12

4

15

30

20

10

0

1.3

1.4

1.2

1.0

0

1.5

2.5

3.0

  1. Figure out the M2 measure for Fund A and B.
  2. Figure out the best fund based on the information ratio.

  1. Use the following table.

Your Portfolio

Benchmark Portfolio

Weight

Return

Weight

Return

Bonds

Stocks

20%

80%

6%

12%

40%

60%

4%

8%
  1. Figure out your portfolio return and the total extra return.
  2. Figure out the contribution of security/sector selection.

Solutions

Expert Solution

jeff jeffy answered 2 years ago
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