Exhibit 25.3 Use the Information Below for the Following Problem(S) Consider the data presented below on three mutual funds and the market. \[\begin{array} { l l c c c } \text { Fund } & \text { Beta } & \text { Devintion (\%) } & \text { Return (\%) } & \text { R } _ { ( } ( \% ) \\ \hline \text { AAA } & 0.75 & 7.0 & 14 & 3 \\ \text { BBB } & 1.05 & 5.0 & 18 & 3 \\ \text { CCC } & 0.89 & 8.0 & 20 & 3 \\ \text { Market } & 1.00 & 8.0 & 12 & 3 \end{array}\] -Refer to Exhibit 25.3.Compute the Jensen Measure for the BBB fund.

A) 4.49 B) 2.74 C) 4.25 D) 5.55 E) 8.99 A) 4.49 B) 2.74 C) 4.25 D) 5.55 E) 8.99

A portfolio manager has the following sequence of cash flows over a two year period: $\begin{array}{c} \begin{array}{lll} \\ \text {Time}\\ 0\\ 1\\ 2 \end{array} \begin{array}{c} \text {Market Value}\\ \text {before cash flow}\\ \$0\\ \$3,200\\ \$6,000 \end{array} \begin{array}{c} \\ \text {Cash In}\\ \$ 3,000 \\ \$ 1,950 \\ -\$90 \end{array} \begin{array}{c} \text {Market Value}\\ \text {after cash flow}\\ \$3,000\\ \$5,150\\ \$5,910 \end{array} \end{array}$ Calculate the portfolio manager's time weighted return.

A) 13.56% B) 11.48% C) 15.50% D) 8.75% E) 10.67% A) 13.56% B) 11.48% C) 15.50% D) 8.75% E) 10.67%

Exhibit 25.4 Use the Information Below for the Following Problem(S) The data presented below has been collected at this point in time. \[\begin{array} { l l c c c } \text { Fund } & \text { Beta } & \text { Deviation(4) } & \text { Return(4) } & \text { Re (46) } \\ \hline \text { AAA } & 1.05 & 4.98 & 16 & 6 \\ \mathrm { BBB } & 1.00 & 4.04 & 15 & 6 \\ \text { CCC } & 0.92 & 3.13 & 11 & 6 \\ \text { Market } & 1.00 & 375 & 13 & 6 \end{array}\] -Refer to Exhibit 25.4.Compute the Treynor Measure for the CCC fund.

A) 5.43 B) 2.74 C) 2.19 D) 2.00 E) 1.65 A) 5.43 B) 2.74 C) 2.19 D) 2.00 E) 1.65

Exhibit 25.11 Use the Information Below for the Following Problem(S) The last year's performance for four mutual funds is presented below. The market return was 10.70%, last year with a standard deviation of 13.1% and the risk-free rate of return was 5%. $\begin{array}{l} \quad\quad\quad\quad\quad\quad\quad\quad\text { Standard }\\ \begin{array}{cccc} \text { Fund } & \text { Beta } & \text { Deviation }(\%) & \text { Retwun }(\%) \\ \hline \mathrm{A} & 1.50 & 18.95 & 12.5 \\ \mathrm{~B} & 1.20 & 12.41 & 13.0 \\ \text { C } & 0.90 & 9.30 & 11.2 \\ \mathrm{D} & 050 & 810 & 95 \end{array} \end{array}$ -Refer to Exhibit 25.11.Compute the Jensen Measure for the B fund.

A) 1.16% B) 2.31% C) 6.90% D) 9.60% E) 10.13% A) 1.16% B) 2.31% C) 6.90% D) 9.60% E) 10.13%

Exhibit 25.2 Use the Information Below for the Following Problem(S) The portfolios identified below are being considered for investment. Assume that during the period under consideration Rf = .04. \[\begin{array} { c c c c } \text { Partilio } & \text { Return } & \text { Beta } & \text { σ } \\ \hline W & 0.18 & 1.8 & 0.06 \\ \mathbf { X } & 0.21 & 0.9 & 0.10 \\ \mathbf { Y } & 0.13 & 0.7 & 0.03 \\ Z & 0.16 & 1.5 & 0.07 \end{array}\] -Refer to Exhibit 25.2.Using the Sharpe Measure,which portfolio performed best?

A) W B) X C) Y D) Z E) Two portfolios are tied A) W B) X C) Y D) Z E) Two portfolios are tied

Exhibit 25.2 Use the Information Below for the Following Problem(S) The portfolios identified below are being considered for investment. Assume that during the period under consideration Rf = .04. \[\begin{array} { c c c c } \text { Partilio } & \text { Return } & \text { Beta } & \text { σ } \\ \hline W & 0.18 & 1.8 & 0.06 \\ \mathbf { X } & 0.21 & 0.9 & 0.10 \\ \mathbf { Y } & 0.13 & 0.7 & 0.03 \\ Z & 0.16 & 1.5 & 0.07 \end{array}\] -Refer to Exhibit 25.2.According to the Treynor Measure,which portfolio performed best?

A) W B) X C) Y D) Z E) Two portfolios are tied A) W B) X C) Y D) Z E) Two portfolios are tied

Exhibit 25.1 Use the Information Below for the Following Problem(S) The portfolios identified below are being considered for investment. During the period under consideration Rf = .03. \[\begin{array} { c c c c } \text { Partfolid } & \text { Return } & \text { Beta } & \text { σ } \\ \hline \text { A } & 0.16 & 1 . 0 & 0.15 \\ B & 0.22 & 1.5 & 0.10 \\ \text { C } & 0.11 & 0.6 & 0.08 \\ D & 0.18 & 1.1 & 0.12 \end{array}\] -Refer to Exhibit 25.1.Using the Sharpe Measure,which portfolio performed best?

A) A B) B C) C D) D E) Two portfolios are tied A) A B) B C) C D) D E) Two portfolios are tied

Exam 25: Evaluation of Portfolio Performance

Exhibit 25.3 Use the Information Below for the Following Problem(S) Consider the data presented below on three mutual funds and the market. Fund Beta Devintion (\%) Return (\%) (\%) AAA 0.75 7.0 14 3 BBB 1.05 5.0 18 3 CCC 0.89 8.0 20 3 Market 1.00 8.0 12 3 -Refer to Exhibit 25.3.Compute the Jensen Measure for the BBB fund.

(Multiple Choice)

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Question 21

A portfolio manager has the following sequence of cash flows over a two year period: Time 0 1 2 Market Value before cash flow \0 \3 ,200 \6 ,000 Cash In \ 3,000 \ 1,950 - \9 0 Market Value after cash flow \3 ,000 \5 ,150 \5 ,910 Calculate the portfolio manager's time weighted return.

(Multiple Choice)

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Question 22

Suppose the expected return for the market portfolio and risk-free rate are 13% and 3% respectively.Stocks A,B,and C have Treynor measures of 0.24,0.16,and 0.11,respectively.Based on this information an investor should

(Multiple Choice)

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Question 23

Components of overall portfolio performance include

(Multiple Choice)

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Question 24

Exhibit 25.4 Use the Information Below for the Following Problem(S) The data presented below has been collected at this point in time. Fund Beta Deviation(4) Return(4) Re (46) AAA 1.05 4.98 16 6 1.00 4.04 15 6 CCC 0.92 3.13 11 6 Market 1.00 375 13 6 -Refer to Exhibit 25.4.Compute the Treynor Measure for the CCC fund.

(Multiple Choice)

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Question 25

Investors want their portfolio managers to completely diversify their portfolio,that is,eliminate all systematic risk.

(True/False)

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Question 26

The Sharpe and Treynor measures always give different rankings.

(True/False)

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Question 27

The cost of active management is the coefficient sER and it is sometimes referred to as

(Multiple Choice)

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Question 28

The ranking differences between the Sharpe,Treynor and Jensen performance measures occur because of the differences in diversification.

(True/False)

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Question 29

Selectivity measures how well a portfolio performed relative to a

(Multiple Choice)

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Question 30

Exhibit 25.12 Use the Information Below for the Following Problem(S) An analyst is considering investing in funds A, B, C, and D. The market portfolio, M, is expected to be 11% next period and the risk-free rate of return is 3%. The market portfolio had a standard deviation over the past ten years of 0.20. The analyst gathered the following information on the four funds. Atack Return Eetr Б A 17\% 1.7 .21 B 20\% 2.1 .25 C 10\% 0.9 .12 D 15\% 1.2 16 -Refer to Exhibit 25.12.Rank the four funds and market portfolio in order from highest to lowest based on their Sharpe measures.

(Multiple Choice)

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Question 31

In the evaluation of bond portfolio performance,the policy effect refers to

(Multiple Choice)

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Question 32

Treynor's performance measure implicitly assumes a completely diversified portfolio.

(True/False)

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Question 33

Exhibit 25.11 Use the Information Below for the Following Problem(S) The last year's performance for four mutual funds is presented below. The market return was 10.70%, last year with a standard deviation of 13.1% and the risk-free rate of return was 5%. Standard Fund Beta Deviation (\%) Retwun (\%) 1.50 18.95 12.5 1.20 12.41 13.0 C 0.90 9.30 11.2 050 810 95 -Refer to Exhibit 25.11.Compute the Jensen Measure for the B fund.

(Multiple Choice)

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Question 34

Exhibit 25.2 Use the Information Below for the Following Problem(S) The portfolios identified below are being considered for investment. Assume that during the period under consideration Rf = .04. Partilio Return Beta σ W 0.18 1.8 0.06 0.21 0.9 0.10 0.13 0.7 0.03 Z 0.16 1.5 0.07 -Refer to Exhibit 25.2.Using the Sharpe Measure,which portfolio performed best?

(Multiple Choice)

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Question 35

Treynor showed that rational,risk averse investors always prefer portfolio possibility lines that have

(Multiple Choice)

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Question 36

Portfolio managers who anticipate an increase in interest rates should

(Multiple Choice)

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Question 37

Exhibit 25.2 Use the Information Below for the Following Problem(S) The portfolios identified below are being considered for investment. Assume that during the period under consideration Rf = .04. Partilio Return Beta σ W 0.18 1.8 0.06 0.21 0.9 0.10 0.13 0.7 0.03 Z 0.16 1.5 0.07 -Refer to Exhibit 25.2.According to the Treynor Measure,which portfolio performed best?

(Multiple Choice)

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Question 38

A disadvantage of the Treynor and Sharpe measures is that

(Multiple Choice)

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Question 39

Exhibit 25.1 Use the Information Below for the Following Problem(S) The portfolios identified below are being considered for investment. During the period under consideration Rf = .03. Partfolid Return Beta σ A 0.16 1.0 0.15 B 0.22 1.5 0.10 C 0.11 0.6 0.08 D 0.18 1.1 0.12 -Refer to Exhibit 25.1.Using the Sharpe Measure,which portfolio performed best?

(Multiple Choice)

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Question 40

Exam 25: Evaluation of Portfolio Performance

A portfolio manager has the following sequence of cash flows over a two year period: Time 0 1 2 Market Value before cash flow \0 \3 ,200 \6 ,000 Cash In \ 3,000 \ 1,950 - \9 0 Market Value after cash flow \3 ,000 \5 ,150 \5 ,910 Calculate the portfolio manager's time weighted return.

Suppose the expected return for the market portfolio and risk-free rate are 13% and 3% respectively.Stocks A,B,and C have Treynor measures of 0.24,0.16,and 0.11,respectively.Based on this information an investor should

Components of overall portfolio performance include

Investors want their portfolio managers to completely diversify their portfolio,that is,eliminate all systematic risk.

The Sharpe and Treynor measures always give different rankings.

The cost of active management is the coefficient sER and it is sometimes referred to as

The ranking differences between the Sharpe,Treynor and Jensen performance measures occur because of the differences in diversification.

Selectivity measures how well a portfolio performed relative to a

In the evaluation of bond portfolio performance,the policy effect refers to

Treynor's performance measure implicitly assumes a completely diversified portfolio.

Treynor showed that rational,risk averse investors always prefer portfolio possibility lines that have

Portfolio managers who anticipate an increase in interest rates should

A disadvantage of the Treynor and Sharpe measures is that

An Overview of the Investment Process

The Asset Allocation Decision

The Global Market Investment Decision

Securities Markets: Organization and Operation

Security-Market Indexes

Efficient Capital Markets

An Introduction to Portfolio Management

An Introduction to Asset Pricing Models

Multifactor Models of Risk and Return

Analysis of Financial Statements

Security Valuation Principles

Macroanalysis and Microvaluation of the Stock Market

Industry Analysis

Company Analysis and Stock Valuation

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The Analysis and Valuation of Bonds

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An Introduction to Derivative Markets and Securities

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