Question
In: Finance
You have been given the following return information for a mutual fund, the market index, and...
You have been given the following return information for a mutual fund, the market index, and the risk-free rate. You also know that the return correlation between the fund and the market is .97.
| Year | Fund | Market | Risk-Free | |||
| 2015 | −15.2 | % | −30.5 | % | 3 | % |
| 2016 | 25.1 | 20.1 | 4 | |||
| 2017 | 13.0 | 11.2 | 2 | |||
| 2018 | 7.4 | 8.0 | 5 | |||
| 2019 | −1.56 | −3.2 | 2 | |||
What are the Sharpe and Treynor ratios for the fund?
Sharpe=
Treynor=
Solutions
Expert Solution
| Year | Fund return in % | ||
| 2015 | -15.2 | ||
| 2016 | 25.1 | ||
| 2017 | 13 | ||
| 2018 | 7.4 | ||
| 2019 | -1.56 | ||
| Average rate of return on funds =Using average function on MS excel | AVERAGE(F720:F724) | 5.75 | |
| Standard deviation =Using stdevp function in MS excel | STDEVP(F720:F724) | 13.58 | |
| Year | Market return in % | ||
| 2015 | -30.5 | -31.6 | |
| 2016 | 20.1 | 19 | |
| 2017 | 11.1 | 10 | |
| 2018 | 8 | 6.9 | |
| 2019 | -3.2 | -4.3 | |
| Average rate of return on funds =Using average function on MS excel | AVERAGE(F729:F733) | 1.1 | |
| Standard deviation =Using stdevp function in MS excel | STDEVP(F729:F733) | 17.47 | |
| Year | risk free return in % | ||
| 2015 | 3 | ||
| 2016 | 4 | ||
| 2017 | 2 | ||
| 2018 | 5 | ||
| 2019 | 2 | ||
| Average rate of return on funds =Using average function on MS excel | AVERAGE(F729:F733) | 3.2 | |
| Beta of fund = (standard deviation of fund/standard deviation of market)*correlation betweend fund and market return | (13.58/17.47)*.97 | 0.75 | |
| required rate of return | risk free rate+(market return-risk free rate)*beta | 3.2+(1.1- | |
| Sharpe ratio = | (expected average return-risk free rate)/standard deviation of fund | (5.75-3.2)/13.58 | 0.1878 |
| Treynor ratio | (expected average return-risk free rate)/beta of fund | (5.75-3.2)/.75 | 3.4000 |
jeff jeffy answered 1 year agoRelated Solutions
You have been given the following return information for a mutual fund, the market index, and...
You have been given the following return information for a
mutual fund, the market index, and the risk-free rate. You also
know that the return correlation between the fund and the market is
.95.
Year
Fund
Market
Risk-Free
2015
−23.00
%
−43.50
%
3
%
2016
25.10
21.40
5
2017
14.30
15.10
2
2018
6.80
8.80
6
2019
−2.34
−5.20
2
Calculate Jensen’s alpha for the fund, as well as its
information ratio. (Do not round intermediate calculations.
Enter the...
You have been given the following return information for a mutual fund, the market index, and...
You have been given the following return information for a
mutual fund, the market index, and the risk-free rate. You also
know that the return correlation between the fund and the market is
0.91.
Year
Fund
Market
Risk-Free
2011
–17.00
%
–33.50
%
2
%
2012
25.10
20.40
6
2013
13.30
12.10
2
2014
6.40
8.00
5
2015
–1.74
–3.20
3
Calculate Jensen’s alpha for the fund, as well as its
information ratio. (Do not round intermediate calculations.
Enter the...
You have been given the following return information for a mutual fund, the market index, and...
You have been given the following return information for a
mutual fund, the market index, and the risk-free rate. You also
know that the return correlation between the fund and the market is
.95. Year Fund Market Risk-Free 2015 −23.00 % −43.50 % 3 % 2016
25.10 21.40 5 2017 14.30 15.10 2 2018 6.80 8.80 6 2019 −2.34 −5.20
2 Calculate Jensen’s alpha for the fund, as well as its information
ratio. (Do not round intermediate calculations. Enter the...
You have been given the following return information for a mutual fund, the market index, and...
You have been given the following return information for a
mutual fund, the market index, and the risk-free rate. You also
know that the return correlation between the fund and the market is
.97. Year Fund Market Risk-Free 2015 −18.2 % −35.5 % 2 % 2016 25.1
20.6 5 2017 13.5 12.7 2 2018 6.8 8.4 6 2019 −1.86 −4.2 3 What are
the Sharpe and Treynor ratios for the fund? (Do not round
intermediate calculations. Round your answers to...
You have been given the following return information for a mutual fund, the market index, and...
You have been given the following return information for a
mutual fund, the market index, and the risk-free rate. You also
know that the return correlation between the fund and the market is
0.97.
Year
Fund
Market
Risk-Free
2011
–18.8
%
–36.5
%
1
%
2012
25.1
20.7
6
2013
13.6
13.0
2
2014
7.0
8.4
6
2015
–1.92
–4.2
2
What are the Sharpe and Treynor ratios for the fund? (Do
not round intermediate calculations. Round your answers to...
You have been given the following return information for a mutual fund, the market index, and...
You have been given the following return information for a
mutual fund, the market index, and the risk-free rate. You also
know that the return correlation between the fund and the market is
0.97.
Year
Fund
Market
Risk-Free
2011
–15.20
%
–30.50
%
3
%
2012
25.10
20.10
4
2013
13.00
11.20
2
2014
7.40
8.00
5
2015
–1.56
–3.20
2
Calculate Jensen’s alpha for the fund, as well as its
information ratio. (Do not round intermediate calculations.
Enter the...
You have been given the following return information for a mutual fund, the market index, and...
You have been given the following return information for a
mutual fund, the market index, and the risk-free rate. You also
know that the return correlation between the fund and the market is
.97.
Year
Fund
Market
Risk-Free
2015
-16.4%
-32.5%
3%
2016
25.1
20.3
4
2017
13.2
11.8
2
2018
6.2
8.0
5
2019
-1.68
-3.2
3
What are the Sharpe and Treynor ratios for the fund? (Do
not round intermediate calculations. Round your answers to 4
decimal places.)...
You have been given the following return information for a mutual fund, the market index, and...
You have been given the following return information for a
mutual fund, the market index, and the risk-free rate. You also
know that the return correlation between the fund and the market is
0.89.
Year
Fund
Market
Risk-Free
2011
–21.20
%
–40.50
%
2
%
2012
25.10
21.10
4
2013
14.00
14.20
2
2014
6.20
8.80
4
2015
–2.16
–5.20
3
Calculate Jensen’s alpha for the fund, as well as its
information ratio. (Do not round intermediate calculations.
Enter the...
You have been given the following return information for a mutual fund, the market index, and...
You have been given the following return information for a
mutual fund, the market index, and the risk-free rate. You also
know that the return correlation between the fund and the market is
0.97.
Year
Fund
Market
Risk-Free
2011
–17.6
%
–34.5
%
2
%
2012
25.1
20.5
4
2013
13.4
12.4
2
2014
6.6
8.4
5
2015
–1.8
–4.2
3
What are the Sharpe and Treynor ratios for the fund? (Do
not round intermediate calculations. Round your answers to...
You have been given the following return information for a mutual fund, the market index, and...
You have been given the following return information for a
mutual fund, the market index, and the risk-free rate. You also
know that the return correlation between the fund and the market is
0.89.
Year
Fund
Market
Risk-Free
2011
–17.60
%
–34.50
%
2
%
2012
25.10
20.50
4
2013
13.40
12.40
2
2014
6.60
8.40
5
2015
–1.80
–4.20
3
Calculate Jensen’s alpha for the fund, as well as its
information ratio.
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