You want to evaluate three mutual funds using the Jensen measure for performance evaluation.The risk-free return during the sample period is 6%,and the average return on the market portfolio is 18%.The average returns,standard deviations,and betas for the three funds are given below. \[\begin{array} { | l | l | l | l | } \hline & \text { Average Return } & \text { Standard. Deviation } & \text { Beta } \\ \hline \text { Fund } \mathrm { A } & 17.6 \% & 10 ^ { \circ } \% & 1.2 \\ \hline \text { Fund B } & 17.5 ^ { \circ } \% & 20 ^ { \circ } \% & 1.0 \\ \hline \text { Fund C } & 17.4 ^ { \circ } \% & 30 ^ { \circ } \% & 0.8 \\ \hline \end{array}\] The fund with the highest Jensen measure is __________.

A) Fund A B) Fund B C) Fund C D) Funds A and B are tied for highest E) Funds A and C are tied for highest A) Fund A B) Fund B C) Fund C D) Funds A and B are tied for highest E) Funds A and C are tied for highest

You want to evaluate three mutual funds using the Sharpe measure for performance evaluation.The risk-free return during the sample period is 6%.The average returns,standard deviations and betas for the three funds are given below,as is the data for the S&P 500 index. \[\begin{array} { | l | l | l | l | } \hline & \text { Average Return } & \text { Standard. Deviation } & \text { Beta } \\ \hline \text { Fund A } & 24 \% & 30 \% & 1.5 \\ \hline \text { Fund B } & 12 \% & 10 \% & 0.5 \\ \hline \text { Fund C } & 22 \% & 20 \% & 1.0 \\ \hline \text { S\&P 500 } & 18 \% & 16 \% & 1.0 \\ \hline \end{array}\] The fund with the highest Sharpe measure is __________.

A) Fund A B) Fund B C) Fund C D) Funds A and B are tied for highest E) Funds A and C are tied for highest A) Fund A B) Fund B C) Fund C D) Funds A and B are tied for highest E) Funds A and C are tied for highest

In a particular year, Aggie Mutual Fund earned a return of 15% by making the following investments in the following asset classes: \[\begin{array} { | l | l | l | } \hline & \text { Weight } & \text { Return } \\ \hline \text { Bonds } & 10 \% & 6 \% \\ \hline \text { Stocks } & 90 \% & 16 \% \\ \hline \end{array}\] The return on a bogey portfolio was 10%, calculated as follows: \[\begin{array} { | l | l | l | } \hline & \text { Weight } & \text { Return } \\ \hline \text { Bonds (Lehman Brothers Index) } & 50 \% & 5 \% \\ \hline \text { Stocks (S\&P 500 Index) } & 50 \% & 15 \% \\ \hline \end{array}\] -The contribution of selection within markets to total excess return was

A) 1% B) 3% C) 4% D) 5% E) none of the above A) 1% B) 3% C) 4% D) 5% E) none of the above

Calculate the M2 measure for the Seminole Fund.

A) 4.0% B) 20.0% C) 2.86% D) 0.8% E) 40.0% A) 4.0% B) 20.0% C) 2.86% D) 0.8% E) 40.0%

The following data are available relating to the performance of Wildcat Fund and the market portfolio: \[\begin{array} { | l | l | l | } \hline & \text { Wildeat } & \text { Market Portfolio } \\ \hline \text { Average Return } & 18 \% & 15 \% \\ \hline \text { Standard Deviation of Returns } & 25 \% & 20 \% \\ \hline \text { Beta } & 1.25 & 1.00 \\ \hline \text { Residual Standard Deviation } & 2 \% & 0 \% \\ \hline \end{array}\] The risk-free return during the sample period was 7%. -What is the information ratio measure of performance evaluation for Wildcat Fund?

A) 1.00% B) 8.80% C) 44.00% D) 50.00% E) none of the above A) 1.00% B) 8.80% C) 44.00% D) 50.00% E) none of the above

The following data are available relating to the performance of Monarch Stock Fund and the market portfolio: \[\begin{array} { | l | l | l | } \hline & \text { Sooner } & \text { Market Portfolio } \\ \hline \text { Average Return } & 20 \% & 11 \% \\ \hline \text { Standard Deviation of Returns } & 44 ^ { \circ } \% & 19 \% \\ \hline \text { Beta } & 1.8 & 1.0 \\ \hline \text { Residual standard deviation } & 2.0 \% & 0.0 \% \\ \hline \end{array}\] The risk-free return during the sample period was 4%. -Calculate the information ratio for Sooner Stock Fund.

A) 1.53 B) 1.30 C) 8.67 D) 31.43 E) 37.14 A) 1.53 B) 1.30 C) 8.67 D) 31.43 E) 37.14

The following data are available relating to the performance of Wildcat Fund and the market portfolio: \[\begin{array} { | l | l | l | } \hline & \text { Wildeat } & \text { Market Portfolio } \\ \hline \text { Average Return } & 18 \% & 15 \% \\ \hline \text { Standard Deviation of Returns } & 25 \% & 20 \% \\ \hline \text { Beta } & 1.25 & 1.00 \\ \hline \text { Residual Standard Deviation } & 2 \% & 0 \% \\ \hline \end{array}\] The risk-free return during the sample period was 7%. -Calculate Treynor's measure of performance for Wildcat Fund.

A) 1.00% B) 8.80% C) 44.00% D) 50.00% E) none of the above A) 1.00% B) 8.80% C) 44.00% D) 50.00% E) none of the above

The following data are available relating to the performance of Long Horn Stock Fund and the market portfolio: \[\begin{array} { | l | l | l | } \hline & \text { Long Horn } & \text { Market Portfolio } \\ \hline \text { Average Return } & 19 \% & 12 \% \\ \hline \text { Standard Deviation of Returns } & 35 \% & 15 \% \\ \hline \text { Beta } & 1.5 & 1.0 \\ \hline \text { Residual standard deviation } & 3.0 \% & 0.0 \% \\ \hline \end{array}\] The risk-free return during the sample period was 6%. -What is the Sharpe measure of performance evaluation for Long Horn Stock Fund?

A) 1.33% B) 4.00% C) 8.67% D) 31.43% E) 37.14% A) 1.33% B) 4.00% C) 8.67% D) 31.43% E) 37.14%

The following data are available relating to the performance of Long Horn Stock Fund and the market portfolio: \[\begin{array} { | l | l | l | } \hline & \text { Long Horn } & \text { Market Portfolio } \\ \hline \text { Average Return } & 19 \% & 12 \% \\ \hline \text { Standard Deviation of Returns } & 35 \% & 15 \% \\ \hline \text { Beta } & 1.5 & 1.0 \\ \hline \text { Residual standard deviation } & 3.0 \% & 0.0 \% \\ \hline \end{array}\] The risk-free return during the sample period was 6%. -Calculate the Jensen measure of performance evaluation for Long Horn Stock Fund.

A) 1.33% B) 4.00% C) 8.67% D) 31.43% E) 37.14% A) 1.33% B) 4.00% C) 8.67% D) 31.43% E) 37.14%

Exam 24: Portfolio Performance Evaluation

You want to evaluate three mutual funds using the Jensen measure for performance evaluation.The risk-free return during the sample period is 6%,and the average return on the market portfolio is 18%.The average returns,standard deviations,and betas for the three funds are given below. Average Return Standard. Deviation Beta Fund 17.6\% 1\% 1.2 Fund B 17.\% 2\% 1.0 Fund C 17.\% 3\% 0.8 The fund with the highest Jensen measure is __________.

(Multiple Choice)

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Question 41

__________ did not develop a popular method for risk-adjusted performance evaluation of mutual funds.

(Multiple Choice)

4.7/5

(68)

Question 42

Suppose two portfolios have the same average return,the same standard deviation of returns,but Buckeye Fund has a higher beta than Gator Fund.According to the Sharpe measure,the performance of Buckeye Fund

(Multiple Choice)

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(86)

Question 43

Hedge funds I.are appropriate as a sole investment vehicle for an investor. II.should only be added to an already well-diversified portfolio. III.pose performance evaluation issues due to non-linear factor exposures. IV.have down-market betas that are typically larger than up-market betas. V.have symmetrical betas.

(Multiple Choice)

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Question 44

Calculate Jensen's measure of performance for Monarch Stock Fund.

(Multiple Choice)

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(86)

Question 45

You want to evaluate three mutual funds using the Sharpe measure for performance evaluation.The risk-free return during the sample period is 6%.The average returns,standard deviations and betas for the three funds are given below,as is the data for the S&P 500 index. Average Return Standard. Deviation Beta Fund A 24\% 30\% 1.5 Fund B 12\% 10\% 0.5 Fund C 22\% 20\% 1.0 S\&P 500 18\% 16\% 1.0 The fund with the highest Sharpe measure is __________.

(Multiple Choice)

4.9/5

(77)

Question 46

In a particular year, Aggie Mutual Fund earned a return of 15% by making the following investments in the following asset classes: Weight Return Bonds 10\% 6\% Stocks 90\% 16\% The return on a bogey portfolio was 10%, calculated as follows: Weight Return Bonds (Lehman Brothers Index) 50\% 5\% Stocks (S\&P 500 Index) 50\% 15\% -The contribution of selection within markets to total excess return was

(Multiple Choice)

4.8/5

(83)

Question 47

Calculate the M² measure for the Seminole Fund.

(Multiple Choice)

5.0/5

(83)

Question 48

Calculate the Jensen measure of performance evaluation for Sooner Stock Fund.

(Multiple Choice)

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(79)

Question 49

The geometric average rate of return is based on

(Multiple Choice)

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(71)

Question 50

The following data are available relating to the performance of Wildcat Fund and the market portfolio: Wildeat Market Portfolio Average Return 18\% 15\% Standard Deviation of Returns 25\% 20\% Beta 1.25 1.00 Residual Standard Deviation 2\% 0\% The risk-free return during the sample period was 7%. -What is the information ratio measure of performance evaluation for Wildcat Fund?

(Multiple Choice)

4.8/5

(79)

Question 51

The following data are available relating to the performance of Monarch Stock Fund and the market portfolio: Sooner Market Portfolio Average Return 20\% 11\% Standard Deviation of Returns 4\% 19\% Beta 1.8 1.0 Residual standard deviation 2.0\% 0.0\% The risk-free return during the sample period was 4%. -Calculate the information ratio for Sooner Stock Fund.

(Multiple Choice)

4.9/5

(82)

Question 52

The following data are available relating to the performance of Wildcat Fund and the market portfolio: Wildeat Market Portfolio Average Return 18\% 15\% Standard Deviation of Returns 25\% 20\% Beta 1.25 1.00 Residual Standard Deviation 2\% 0\% The risk-free return during the sample period was 7%. -Calculate Treynor's measure of performance for Wildcat Fund.

(Multiple Choice)

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Question 53

Define and discuss the Sharpe,Treynor,and Jensen measures of portfolio performance evaluation,and the situations in which each measure is the most appropriate measure.

(Essay)

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Question 54

Risk-adjusted mutual fund performance measures have decreased in popularity because

(Multiple Choice)

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(75)

Question 55

The following data are available relating to the performance of Long Horn Stock Fund and the market portfolio: Long Horn Market Portfolio Average Return 19\% 12\% Standard Deviation of Returns 35\% 15\% Beta 1.5 1.0 Residual standard deviation 3.0\% 0.0\% The risk-free return during the sample period was 6%. -What is the Sharpe measure of performance evaluation for Long Horn Stock Fund?

(Multiple Choice)

4.9/5

(74)

Question 56

Suppose two portfolios have the same average return,the same standard deviation of returns,but Buckeye Fund has a lower beta than Gator Fund.According to the Sharpe measure,the performance of Buckeye Fund

(Multiple Choice)

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(63)

Question 57

In measuring the comparative performance of different fund managers,the preferred method of calculating rate of return is __________.

(Multiple Choice)

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Question 58

The following data are available relating to the performance of Long Horn Stock Fund and the market portfolio: Long Horn Market Portfolio Average Return 19\% 12\% Standard Deviation of Returns 35\% 15\% Beta 1.5 1.0 Residual standard deviation 3.0\% 0.0\% The risk-free return during the sample period was 6%. -Calculate the Jensen measure of performance evaluation for Long Horn Stock Fund.

(Multiple Choice)

4.9/5

(86)

Question 59

Suppose two portfolios have the same average return,the same standard deviation of returns,but Aggie Fund has a lower beta than Raider Fund.According to the Treynor measure,the performance of Aggie Fund

(Multiple Choice)

5.0/5

(77)

Question 60

__________ did not develop a popular method for risk-adjusted performance evaluation of mutual funds.

Suppose two portfolios have the same average return,the same standard deviation of returns,but Buckeye Fund has a higher beta than Gator Fund.According to the Sharpe measure,the performance of Buckeye Fund

Calculate Jensen's measure of performance for Monarch Stock Fund.

Calculate the M² measure for the Seminole Fund.

Calculate the Jensen measure of performance evaluation for Sooner Stock Fund.

The geometric average rate of return is based on

Define and discuss the Sharpe,Treynor,and Jensen measures of portfolio performance evaluation,and the situations in which each measure is the most appropriate measure.

Risk-adjusted mutual fund performance measures have decreased in popularity because

Suppose two portfolios have the same average return,the same standard deviation of returns,but Buckeye Fund has a lower beta than Gator Fund.According to the Sharpe measure,the performance of Buckeye Fund

In measuring the comparative performance of different fund managers,the preferred method of calculating rate of return is __________.

Suppose two portfolios have the same average return,the same standard deviation of returns,but Aggie Fund has a lower beta than Raider Fund.According to the Treynor measure,the performance of Aggie Fund

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