Exhibit 18-8 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) \[\begin{array}{c} \text { Weights }\\ \begin{array} { c c } \text { Palicy } & \text { Actual } \\ \hline 50 \% \text { stacks } & 60 \% \text { stacks } \\ 50 \% \text { bonds } & 40 \% \text { bonds } \\ \quad \quad \quad \quad\text { Retunns } \\ \text { Index } & \text { Actual } \\ \hline \text { g\% 5tacks } & 9 \% \text { 5tacks } \\ 5 \% \text { bonds } & 7 \% \text { bonds } \end{array} \end{array}\] -Refer to Exhibit 18-8. Which of the following statements is true?

A) Sector/security selection hurt the portfolio performance; returns were 1.4% less than if the manager invested the funds in stocks and bond indexes. B) Sector/security selection improved the portfolio performance by 1.4%; each sector return was higher than for index value. C) Sector/security selection hurt the portfolio performance; returns were 6.8% less than if the manager invested the funds in stocks and bond indexes. D) Sector/security selection improved the portfolio performance by 6.8%; each sector return was higher than for index return. E) None of the above. A) Sector/security selection hurt the portfolio performance; returns were 1.4% less than if the manager invested the funds in stocks and bond indexes. B) Sector/security selection improved the portfolio performance by 1.4%; each sector return was higher than for index value. C) Sector/security selection hurt the portfolio performance; returns were 6.8% less than if the manager invested the funds in stocks and bond indexes. D) Sector/security selection improved the portfolio performance by 6.8%; each sector return was higher than for index return. E) None of the above.

A portfolio manager has the following sequence of cash flows over a two year period. \[\begin{array} { | l | c | c | c | } \hline \text { Time } & 0 & 1 & 2 \\ \hline \text { autflows } & - \$ 2,000 & - \$ 500 & \\ \hline \text { inflows } & & \$ 50 & \$ 3,090 \\ \hline \end{array}\] Calculate the portfolio manager's dollar 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 18-11 USE THE FOLLOWING INFORMATION FOR THE NEXT 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%. \[\begin{array} { c c c c } \text { Fund } & \text { Beta } & \begin{array} { c } \text { Standard } \\ \text { Deviation (\%) } \end{array} & \text { Return (\%) } \\ \hline \text { A } & 1.50 & 18.95 & 12.5 \\ \text { B } & 1.20 & 12.41 & 13.0 \\ \text { C } & 0.90 & 9.30 & 11.2 \\ \text { D } & 0.50 & 8.10 & 9.5 \end{array}\] -Refer to Exhibit 18-11. Compute the Treynor Measure for the C fund.

A) 0.012 B) 0.040 C) 0.069 D) 0.396 E) 1.142 A) 0.012 B) 0.040 C) 0.069 D) 0.396 E) 1.142

Exhibit 18-4 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) The data presented below has been collected at this point in time. $\begin{array}{llccc} \text { Fund } & \text { Beta } & \begin{array}{c} \text { Standard } \\ \text { Deviation }(\%) \end{array} & \text { Return }(\%) & \mathrm{R}_{\mathrm{f}}(\%) \\ \hline \text { AAA } & 1.05 & 4.98 & 16 & 6 \\ \text { BBB } & 1.00 & 4.04 & 15 & 6 \\ \text { CCC } & 0.92 & 3.13 & 11 & 6 \\ \text { Market } & 1.00 & 3.75 & 13 & 6 \end{array}$ -Refer to Exhibit 18-4. 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 18-2 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) The portfolios identified below are being considered for investment. Assume that during the period under consideration Rf = .04. $\begin{array}{cccc} \text { Portfolio } & \text { Return } & \text { Beta } & \sigma \\ \hline \text { W } & 0.18 & 1.8 & 0.06 \\ \text { X } & 0.21 & 0.9 & 0.10 \\ \text { Y } & 0.13 & 0.7 & 0.03 \\ \text { Z } & 0.16 & 1.5 & 0.07 \end{array}$ -Refer to Exhibit 18-2. 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 18-5 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) The data presented below has been collected at this point in time. $\begin{array}{llccc} \text { Fund } & \text { Beta } & \begin{array}{c} \text { Standard } \\ \text { Deviation }(\%) \end{array} & \text { Return }(\%) & \mathrm{R}_{\mathrm{f}}(\%) \\ \hline \mathrm{XXX} & 1.07 & 5.13 & 19 & 6 \\ \text { YYY } & 1.02 & 4.28 & 17 & 6 \\ \text { ZZZ } & 0.86 & 3.52 & 12 & 6 \\ \text { Market } & 1.00 & 3.80 & 13 & 6 \end{array}$ -What is the Sharpe measure for the S&P 500 over the last ten years if the standard deviation was 8% and the return was 14%?

A) 1.55 B) 1.69 C) 1.75 D) 1.99 E) 2.09 A) 1.55 B) 1.69 C) 1.75 D) 1.99 E) 2.09

Exhibit 18-11 USE THE FOLLOWING INFORMATION FOR THE NEXT 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%. \[\begin{array} { c c c c } \text { Fund } & \text { Beta } & \begin{array} { c } \text { Standard } \\ \text { Deviation (\%) } \end{array} & \text { Return (\%) } \\ \hline \text { A } & 1.50 & 18.95 & 12.5 \\ \text { B } & 1.20 & 12.41 & 13.0 \\ \text { C } & 0.90 & 9.30 & 11.2 \\ \text { D } & 0.50 & 8.10 & 9.5 \end{array}\] -Refer to Exhibit 18-11. 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 18-3 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) Consider the data presented below on three mutual funds and the market. $\begin{array}{llccc} \text { Fund } & \text { Beta } & \begin{array}{c} \text { Standard } \\ \text { Deviation }(\%) \end{array} & \text { Return }(\%) & \mathrm{R}_{\mathrm{f}}(\%) \\ \hline \text { AAA } & 0.75 & 7.0 & 14 & 3 \\ \text { BBB } & 1.05 & 5.0 & 18 & 3 \\ \text { CCC } & 0.89 & 8.0 & 20 & 3 \\ \text { Market } & 1.00 & 8.0 & 12 & 3 \end{array}$ -Refer to Exhibit 18-3. 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

Exhibit 18-10 THE FOLLOWING INFORMATION IS FOR THE NEXT PROBLEM(S) Consider the following information for a portfolio manager \[\begin{array} { | l | c | c | c | c | } \hline & \begin{array} { c } \text { Policy } \\ \text { Weight } \end{array} & \begin{array} { c } \text { Actual } \\ \text { Weight } \end{array} & \begin{array} { c } \text { Index } \\ \text { Returns } \end{array} & \begin{array} { c } \text { Actual } \\ \text { Retums } \end{array} \\ \hline \text { Stacks } & 0.65 & 0.7 & 0.11 & 0.12 \\ \hline \text { Bonds } & 0.3 & 0.25 & 0.07 & 0.08 \\ \hline \text { Cash } & 0.05 & 0.05 & 0.03 & 0.025 \\ \hline \end{array}\] -Refer to Exhibit 18-10. Calculate the percentage return that can be attributed to the security selection decision.

A) 0.105% B) 0.925% C) 0.20% D) 0.96% E) 0.94% A) 0.105% B) 0.925% C) 0.20% D) 0.96% E) 0.94%

Exam 18: Evaluation of Portfolio Performance

Treynor developed the first composite measure of portfolio performance by introducing the capital market line, which defines the relationship between the return of a portfolio over time and the return for the market portfolio.

(True/False)

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Question 61

Selectivity measures how well a portfolio performed relative to a

(Multiple Choice)

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Question 62

Exhibit 18-8 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) Weights Palicy Actual 50\% stacks 60\% stacks 50\% bonds 40\% bonds Retunns Index Actual g\% 5tacks 9\% 5tacks 5\% bonds 7\% bonds -Refer to Exhibit 18-8. Which of the following statements is true?

(Multiple Choice)

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Question 63

The major requirements of a portfolio manager include the following, except

(Multiple Choice)

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Question 64

A portfolio manager has the following sequence of cash flows over a two year period. Time 0 1 2 autflows -\ 2,000 -\ 500 inflows \ 50 \ 3,090 Calculate the portfolio manager's dollar weighted return.

(Multiple Choice)

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Question 65

Exhibit 18-11 USE THE FOLLOWING INFORMATION FOR THE NEXT 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%. Fund Beta Standard Deviation (\%) Return (\%) A 1.50 18.95 12.5 B 1.20 12.41 13.0 C 0.90 9.30 11.2 D 0.50 8.10 9.5 -Refer to Exhibit 18-11. Compute the Treynor Measure for the C fund.

(Multiple Choice)

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Question 66

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

(Multiple Choice)

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Question 67

Exhibit 18-6 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) Given the following information evaluate the performance of Cloud Incorporated (CI). $R_{CI} 0.17$ $\quad$ $\quad$ $B_{CI}=1.05$ $\quad$ $\quad$ $\mathrm{R}_{\mathrm{f}}=0.07$ $\quad$ $\quad$ $\mathrm{R}_{\mathrm{m}}=0.12$ -Refer to Exhibit 18-6. Calculate CI's risk.

(Multiple Choice)

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Question 68

Attribution analysis separates a portfolio manager's performance into an allocation effect and selection effect.

(True/False)

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Question 69

An appropriate composite risk measure that indicates the relative price volatility for a bond compared to interest rate changes is the bond's yield to maturity.

(True/False)

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Question 70

Exhibit 18-4 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) The data presented below has been collected at this point in time. Fund Beta Standard Deviation (\%) Return (\%) (\%) AAA 1.05 4.98 16 6 BBB 1.00 4.04 15 6 CCC 0.92 3.13 11 6 Market 1.00 3.75 13 6 -Refer to Exhibit 18-4. Compute the Treynor Measure for the CCC fund.

(Multiple Choice)

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Question 71

Exhibit 18-6 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) Given the following information evaluate the performance of Cloud Incorporated (CI). $R_{CI} 0.17$ $\quad$ $\quad$ $B_{CI}=1.05$ $\quad$ $\quad$ $\mathrm{R}_{\mathrm{f}}=0.07$ $\quad$ $\quad$ $\mathrm{R}_{\mathrm{m}}=0.12$ -Refer to Exhibit 18-6. Calculate CI's overall performance.

(Multiple Choice)

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Question 72

Exhibit 18-2 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) The portfolios identified below are being considered for investment. Assume that during the period under consideration Rf = .04. Portfolio Return Beta \sigma W 0.18 1.8 0.06 X 0.21 0.9 0.10 Y 0.13 0.7 0.03 Z 0.16 1.5 0.07 -Refer to Exhibit 18-2. Using the Sharpe Measure, which portfolio performed best?

(Multiple Choice)

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Question 73

The Sharpe measure examines the risk premium per unit of systematic risk.

(True/False)

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Question 74

Exhibit 18-5 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) The data presented below has been collected at this point in time. Fund Beta Standard Deviation (\%) Return (\%) (\%) 1.07 5.13 19 6 YYY 1.02 4.28 17 6 ZZZ 0.86 3.52 12 6 Market 1.00 3.80 13 6 -What is the Sharpe measure for the S&P 500 over the last ten years if the standard deviation was 8% and the return was 14%?

(Multiple Choice)

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Question 75

Exhibit 18-11 USE THE FOLLOWING INFORMATION FOR THE NEXT 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%. Fund Beta Standard Deviation (\%) Return (\%) A 1.50 18.95 12.5 B 1.20 12.41 13.0 C 0.90 9.30 11.2 D 0.50 8.10 9.5 -Refer to Exhibit 18-11. Compute the Jensen Measure for the B fund.

(Multiple Choice)

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Question 76

A disadvantage of the Treynor and Sharpe measures is that

(Multiple Choice)

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Question 77

Relative return portfolio performance measures

(Multiple Choice)

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Question 78

Exhibit 18-3 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) Consider the data presented below on three mutual funds and the market. Fund Beta Standard Deviation (\%) 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 18-3. Compute the Jensen Measure for the BBB fund.

(Multiple Choice)

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Question 79

Exhibit 18-10 THE FOLLOWING INFORMATION IS FOR THE NEXT PROBLEM(S) Consider the following information for a portfolio manager Policy Weight Actual Weight Index Returns Actual Retums Stacks 0.65 0.7 0.11 0.12 Bonds 0.3 0.25 0.07 0.08 Cash 0.05 0.05 0.03 0.025 -Refer to Exhibit 18-10. Calculate the percentage return that can be attributed to the security selection decision.

(Multiple Choice)

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Question 80

Treynor developed the first composite measure of portfolio performance by introducing the capital market line, which defines the relationship between the return of a portfolio over time and the return for the market portfolio.

Selectivity measures how well a portfolio performed relative to a

Exhibit 18-8 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) Weights Palicy Actual 50\% stacks 60\% stacks 50\% bonds 40\% bonds Retunns Index Actual g\% 5tacks 9\% 5tacks 5\% bonds 7\% bonds -Refer to Exhibit 18-8. Which of the following statements is true?

The major requirements of a portfolio manager include the following, except

A portfolio manager has the following sequence of cash flows over a two year period. Time 0 1 2 autflows -\ 2,000 -\ 500 inflows \ 50 \ 3,090 Calculate the portfolio manager's dollar weighted return.

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

Attribution analysis separates a portfolio manager's performance into an allocation effect and selection effect.

An appropriate composite risk measure that indicates the relative price volatility for a bond compared to interest rate changes is the bond's yield to maturity.

The Sharpe measure examines the risk premium per unit of systematic risk.

A disadvantage of the Treynor and Sharpe measures is that

Relative return portfolio performance measures

The Investment Setting

The Asset Allocation Decision

Selecting Investments in a Global Market

Securities Markets and the Economy

Efficient Capital Markets

An Introduction to Portfolio Management

Asset Pricing Models: Capm and Apt

Economic and Industry Analysis

Company Analysis and Stock Valuation

Technical Analysis

Bond Fundamentals

The Analysis and Valuation of Bonds

An Introduction to Derivative Markets and Securities

Derivatives: Analysis and Valuation

Equity Portfolio Management Strategies

Bond Portfolio Management Strategies

Professional Money Management, Alternative Assets, and Industry Ethics

Analysis of Financial Statements

An Introduction to Security Valuation

Web Appendix: A Review of Statistics and the Security Market Line

Web Appendix: A Review of Statistics and the Security Market Line

Appendix: Objectives and Constraints of Institutional Investors

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