Question

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 Risk-F Year 2011 2012 2013 2014 Fund -16.4 25.1 13.2 Market -32.5 20.3 2015 -1.68 What are the Sharpe and Treynor ratios for the fund? (Do not round Intermediate calculations. Round your answers to 4 decimal places.) Sharpe ratio Treynor ratio

Answer 1

Answer:

Calculate the Sharpe ratio in Average return Ecrined on fund is dp is 5.28% Average risk-foce date de return is of is 3.40% standard deviation of fund is op is 15.6115% sharp ratio = 8p of - 0.0528 0.0340 0.1561 Sharp ratio = 0.12044

Calculate Treynor Ratio ;- average return Eeroined on fund is op is 5.28% average risk free rate of return is of is 3.46% beta of fund is ß is 0.74 Treynor Ratio = rp-re 20:0528-00340 0.77 Treyner Ratio = 0.0242116

working Notes's: - calculate the average fund return Average fund return a E fund return - Number of year = -164 % + 25.1% +13.2% +6-2741-68/ = 26.42% 5 = 5.28% working Notes 2 : - Average market return = {market deturn Number of year -32-57.+ 9.0:37 +1.89 +8.0% 43,9% - 444 5 0.88% = Working Note 3: - a {Risk ? free rate Average Risk free rate = " Mumber of year 2 3% +4% +2%. +57 +37. 17% = 3.4%

Working Note 4 :- calculate the standard deviation of fund Return (R) 1 CR-ŘI TCR - BJ2 Year -21.687 4.700252 2011 19.82/. 3.92837. 2012 7.92.7. | O. 62737. 2013 ०.१२. 0-0085x 0.062 - 6.967. 10.4844 १.74828 S.281 4.74822/472.4372/. - 0.64 0.251 0.132 2014 2015 - 0.0168 standard Deviation SOp762-431)-1516115 working Notes hit and deviation de market I (B) Year २०। 2012 Return -32. 4R-R -?? •38/ (R-RD- 11-14221 14.42/- 3.7714 १०॥ + 20.37 + 11-8y. + 8. 7 10.१२४ 7.19/ 1. 19257. 0.50697 २०१५ 2015 - 327 |-4082 001665/ 16.72951 - 16774544 4.1१५१/- 0.881. Standard Deviation SAL4-1१५१)-20. 4815

Wooking Note 6 :- calculate the beta of fund B = Correlation coofficient op Correlation coefficient is 0.97 standard deviation of fund p is op is 15.61% standard deviation of market is an is 20:48% B = Correlation Cofficient & P = 0.97 x 18.612 20:48% = 0.73934