Question

a. What are the Sharpe ratios for the Miranda Fund and the S&P 500? (Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Round your answer to 4 decimal places.)

Problem 24-21 Kelli Blakely is a portfolio manager for the Miranda Fund, a core large-cap equity fund. The market proxy and benchmark for performance measurement purposes is the S&P 500. Although the Miranda portfolio generally mirrors the asset class and sector weightings of the S&P, Blakely is allowed a significant amount of leeway in managing the fund. However, her portfolio holds only stocks found in the S&P 500 and cash. Blakely was able to produce exceptional returns last year (as outlined in the table below) through her market timing and security selection skills. At the outset of the year, she became extremely concerned that the combination of a weak economy and geopolitical uncertainties would negatively impact the market. Taking a bold step, she changed her market allocation. For the entire year her asset class exposures averaged 50% in stocks and 50% in cash. The S&P's allocation between stocks and cash during the period was a constant 97% and 3%, respectively. The risk-free rate of return was 2%. One-Year Trailing Returns Miranda Fund S&P 500 10.2% Return -22.58 Standard deviation 378 448 Beta 1.10 1.00

b. What are the M ² measures for Miranda and the S&P 500? (Do not round intermediate calculations. Round your answer to 2

c. What is the Treynor measure for the Miranda Fund and the S&P 500? (Do not round intermediate calculations. Round your answer to 4 decimal places.)

d. What is the Jensen measure for the Miranda Fund? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Answer 1

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ke - Microsoft Excel (Product Activation Failed) Add-Ins File Home Insert Page Layout Formulas Data Review View - 2x % Cut Σ AutoSum : A === Dr General Wrap Text Merge Merge & Center - Center SF $ -% % 4:0 .00 Insert Delete Format Conditional Format Formatting as Table Styles Cell Styles Fill Clear Sort & Filter Editing Find & Select Alignment Number Cells Calibri -11AA E Copy Paste Format Painter BI U D A Clipboard Font FM1 - for FK FLEM 1 EN FO FP FO FR S&P 500 -22.50% 44% o ooo vane wn miranda fund 10.20% 37% 1.1 2% return (Rp) standard deviation (SDp) beta Rf = RISK FREE RATE (a) SHARPE RATIO (Rp - Rf)/SDp 2% 0.2216 -0.5568 (b) M square (Rp -Rf)(SD(M)/SD(P)) - (Rm-Rf) 11 34.25% [=(0.102-0.02)*(0.44/0.37)-(-0.225-0.02)] 12 13 (c) TREYNOR RATIO (Rp - Rf)/BETA 0.0745 -0.2450 14 15 16 17 18 19 (d ) JENSON'S ALPHA ALPHA = Rp - [Rf + BETA(Rm-Rf) ALPHA=0.102 - (0.02 +1.1(-0.225-0.02)] ALPHA = 0.3515 = 35.15% N beta port future INDEX INTL CAP BUD LEASING PV, FV, ANNUITY DIR right clean YIELD bond portfolio cap stru WACC c oNvexity DGM ferences RESI ex div DIV POLICY NAME 20J 130% Red DIV YIELDI 0 + 0 ENG 12455 20-11-2019 DEB *