The following data are available relating to the performance of Monarch Stock Fund and the market portfolio: \[\begin{array} { l c c } && { \text { Market } } \\ & \text { Monarch } & \text { Portfolio } \\ \text { Average return } & 16 \% & 12 \% \\ \text { Standard deviations of returns } &26 \% & 22 \% \\ \text { Beta } & 1.15 & 1.00 \\ \text { Residual standard deviation } &1\%&0\%\\ \end{array}\] The risk-free return during the sample period was 4%. Calculate Sharpe's measure of performance for Monarch Stock Fund.

A) 1% B) 46% C) 44% D) 50% E) None of the options are correct. A) 1% B) 46% C) 44% D) 50% E) None of the options are correct.

The following data are available relating to the performance of Long Horn Stock Fund and the market portfolio: \[\begin{array} { l c c } & & \text { Market } \\ & \text { Long Horn}& \text { Portfolio } \\ \text { Average return } & 19 \% & 12 \% \\ \text { Standard deviations of returns } & 35 \% & 15 \% \\ \text { Beta } & 1.5 & 1.0 \\ \text { Residual standard deviation } & 3.0 \% & 0.0 \% \\ \end{array}\] 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%

The following data are available relating to the performance of Sooner Stock Fund and the market portfolio: $\begin{array}{lcc} & & \text { Market } \\ & \text { Sooner } & \text { Portfolio } \\ \text { Average return } & 20 \% & 11 \% \\ \text { Standard deviations of returns }& 44 \% & 19\% \\ \text { Beta } & 1.8 & 1.0 \\ \text { Residual standard deviation } & 2.0\% & 0.0\% \end{array}$ The risk-free return during the sample period was 3%. 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 Seminole Fund and the market portfolio: \[\begin{array} { l c c } && { \text { Market } } \\ & \text { Monarch } & \text { Portfolio } \\ \text { Average return } & 18 \% & 14 \% \\ \text { Standard deviations of returns } &30 \% & 22 \% \\ \text { Beta } & 1.4 & 1.00 \\ \text { Residual standard deviation } &4.0\%&0.0\%\\ \hline \end{array}\] The risk-free return during the sample period was 6%. If you wanted to evaluate the Seminole Fund using the M2 measure, what percent of the adjusted portfolio would need to be invested in T-Bills?

A) -36% (borrow) B) 50% C) 8% D) 36% E) 27% A) -36% (borrow) B) 50% C) 8% D) 36% E) 27%

The following data are available relating to the performance of Long Horn Stock Fund and the market portfolio: \[\begin{array} { l c c } & & \text { Market } \\ & \text { Long Horn}& \text { Portfolio } \\ \text { Average return } & 19 \% & 12 \% \\ \text { Standard deviations of returns } & 35 \% & 15 \% \\ \text { Beta } & 1.5 & 1.0 \\ \text { Residual standard deviation } & 3.0 \% & 0.0 \% \\ \end{array}\] 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 Modigliani M2 measure and the Treynor T2 measure

A) are identical. B) are nearly identical and will rank portfolios the same way. C) are nearly identical, but might rank portfolios differently. D) are somewhat different; M2 can be used to rank portfolios, but T2 cannot. E) are somewhat different; T2 can be used to rank portfolios, but M2 cannot. A) are identical. B) are nearly identical and will rank portfolios the same way. C) are nearly identical, but might rank portfolios differently. D) are somewhat different; M2 can be used to rank portfolios, but T2 cannot. E) are somewhat different; T2 can be used to rank portfolios, but M2 cannot.

Exam 24: Portfolio Performance Evaluation

The following data are available relating to the performance of Monarch Stock Fund and the market portfolio: Market Monarch Portfolio Average return 16\% 12\% Standard deviations of returns 26\% 22\% Beta 1.15 1.00 Residual standard deviation 1\% 0\% The risk-free return during the sample period was 4%. Calculate Sharpe's measure of performance for Monarch Stock Fund.

(Multiple Choice)

4.8/5

(34)

Question 61

Suppose you purchase one share of the stock of Volatile Engineering Corporation at the beginning of year 1 for $36. At the end of year 1, you receive a $2 dividend and buy one more share for $30. At the end of year 2, you receive total dividends of $4 (i.e., $2 for each share) and sell the shares for $36.45 each. The dollar-weighted return on your investment is

(Multiple Choice)

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(39)

Question 62

Suppose you own two stocks, A and B In year 1, stock A earns a 2% return and stock B earns a 9% return. In year 2, stock A earns an 18% return and stock B earns an 11% return. __________ has the higher arithmetic average return

(Multiple Choice)

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(40)

Question 63

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

(Multiple Choice)

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(32)

Question 64

The following data are available relating to the performance of Long Horn Stock Fund and the market portfolio: Market Long Horn Portfolio Average return 19\% 12\% Standard deviations 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)

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(34)

Question 65

Henriksson (1984) found that, on average, betas of funds __________ during market advances.

(Multiple Choice)

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(36)

Question 66

Suppose the risk-free return is 6%. The beta of a managed portfolio is 1.5, the alpha is 3%, and the average return is 18%. Based on Jensen's measure of portfolio performance, you would calculate the return on the market portfolio as

(Multiple Choice)

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Question 67

The geometric average rate of return is based on

(Multiple Choice)

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(31)

Question 68

The following data are available relating to the performance of Sooner Stock Fund and the market portfolio: Market Sooner Portfolio Average return 20\% 11\% Standard deviations of returns 44\% 19\% Beta 1.8 1.0 Residual standard deviation 2.0\% 0.0\% The risk-free return during the sample period was 3%. Calculate the information ratio for Sooner Stock Fund.

(Multiple Choice)

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(32)

Question 69

Suppose two portfolios have the same average return and 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)

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(36)

Question 70

Suppose two portfolios have the same average return and the same standard deviation of returns, but portfolio A has a higher beta than portfolio B. According to the Sharpe measure, the performance of portfolio A

(Multiple Choice)

4.9/5

(35)

Question 71

The following data are available relating to the performance of Seminole Fund and the market portfolio: Market Monarch Portfolio Average return 18\% 14\% Standard deviations of returns 30\% 22\% Beta 1.4 1.00 Residual standard deviation 4.0\% 0.0\% The risk-free return during the sample period was 6%. If you wanted to evaluate the Seminole Fund using the M² measure, what percent of the adjusted portfolio would need to be invested in T-Bills?

(Multiple Choice)

5.0/5

(47)

Question 72

The following data are available relating to the performance of Long Horn Stock Fund and the market portfolio: Market Long Horn Portfolio Average return 19\% 12\% Standard deviations 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)

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(38)

Question 73

A portfolio manager's ranking within a comparison universe may not provide a good measure of performance because

(Multiple Choice)

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(53)

Question 74

Suppose you own two stocks, A and B In year 1, stock A earns a 2% return and stock B earns a 9% return. In year 2, stock A earns an 18% return and stock B earns an 11% return. Which stock has the higher geometric average return?

(Multiple Choice)

4.9/5

(35)

Question 75

The Modigliani M² measure and the Treynor T² measure

(Multiple Choice)

4.9/5

(27)

Question 76

Most professionally managed equity funds generally

(Multiple Choice)

4.8/5

(35)

Question 77

Suppose you own two stocks, A and B In year 1, stock A earns a 2% return and stock B earns a 9% return. In year 2, stock A earns an 18% return and stock B earns an 11% return. __________ has the higher arithmetic average return

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

Henriksson (1984) found that, on average, betas of funds __________ during market advances.

Suppose the risk-free return is 6%. The beta of a managed portfolio is 1.5, the alpha is 3%, and the average return is 18%. Based on Jensen's measure of portfolio performance, you would calculate the return on the market portfolio as

The geometric average rate of return is based on

Suppose two portfolios have the same average return and 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

Suppose two portfolios have the same average return and the same standard deviation of returns, but portfolio A has a higher beta than portfolio B. According to the Sharpe measure, the performance of portfolio A

A portfolio manager's ranking within a comparison universe may not provide a good measure of performance because

Suppose you own two stocks, A and B In year 1, stock A earns a 2% return and stock B earns a 9% return. In year 2, stock A earns an 18% return and stock B earns an 11% return. Which stock has the higher geometric average return?

The Modigliani M² measure and the Treynor T² measure

Most professionally managed equity funds generally

The Investment Environment

Asset Classes and Financial Instruments

How Securities Are Traded

Mutual Funds and Other Investment Companies

Risk, Return, and the Historical Record

Capital Allocation to Risky Assets

Optimal Risky Portfolios

Index Models

The Capital Asset Pricing Model

Arbitrage Pricing Theory and Multifactor Models of Risk and Return

The Efficient Market Hypothesis

Behavioral Finance and Technical Analysis

Empirical Evidence on Security Returns

Bond Prices and Yields

The Term Structure of Interest Rates

Managing Bond Portfolios

Macroeconomic and Industry Analysis

Equity Valuation Models

Financial Statement Analysis

Options Markets: Introduction

Option Valuation

Futures Markets

Futures, Swaps, and Risk Management

International Diversification

Hedge Funds

The Theory of Active Portfolio Management

Investment Policy and the Framework of the Cfa Institute

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