Question 1

The following data are available relating to the performance of Long Horn Stock Fund and the market portfolio:  The risk-free return during the sample period was 6%.
What is the Sharpe measure of performance evaluation for Long Horn Stock Fund?

Accepted Answer

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

Question 2

The M-squared measure considers

Accepted Answer

A) only the return when evaluating mutual funds. 
B) the risk-adjusted return when evaluating mutual funds. 
C) only the total risk when evaluating mutual funds. 
D) only the market risk when evaluating mutual funds.

Question 3

In a particular year, Aggie Mutual Fund earned a return of 15% by making the following investments in the following asset classes:  The return on a bogey portfolio was 10%, calculated as follows:
 The contribution of asset allocation across markets to the total excess return was

Accepted Answer

A) 1%. 
B) 3%. 
C) 4%. 
D) 5%.

Question 4

Suppose the risk-free return is 4%.The beta of a managed portfolio is 1.2, the alpha is 1%, and the average return is 14%.Based on Jensen's measure of portfolio performance, you would calculate the return on the market portfolio as

Accepted Answer

A) 11.5%. 
B) 14%. 
C) 15%. 
D) 16%.

Question 5

The following data are available relating to the performance of Sooner Stock Fund and the market portfolio:  The risk-free return during the sample period was 3%.
What is the Sharpe measure of performance evaluation for Sooner Stock Fund?

Accepted Answer

A) 1.33% 
B) 4.00% 
C) 8.67% 
D) 38.6%

Question 6

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

Accepted Answer

A) -1.75%. 
B) 4.08%. 
C) 8.53%. 
D) 8.00%. 
E) 12.35%.

Question 7

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 nonlinear factor exposures.
IV. have down-market betas that are typically larger than up-market betas.
V. have symmetrical betas.

Accepted Answer

A) I only 
B) II and V 
C) I, III, and IV 
D) II, III, and IV

Question 8

The following data are available relating to the performance of Sooner Stock Fund and the market portfolio:  The risk-free return during the sample period was 3%.
Calculate the information ratio for Sooner Stock Fund.

Accepted Answer

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

Question 9

The following data are available relating to the performance of Monarch Stock Fund and the market portfolio:  The risk-free return during the sample period was 4%.
Calculate Sharpe's measure of performance for Monarch Stock Fund.

Accepted Answer

A) 1% 
B) 46% 
C) 44% 
D) 50%

Question 10

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

Accepted Answer

A) is better than the performance of Raider Fund. 
B) is the same as the performance of Raider Fund. 
C) is poorer than the performance of Raider Fund. 
D) cannot be measured as there are no data on the alpha of the portfolio.

Question 11

The following data are available relating to the performance of Wildcat Fund and the market portfolio:  The risk-free return during the sample period was 7%.
What is the information ratio measure of performance evaluation for Wildcat Fund?

Accepted Answer

A) 1.00% 
B) 8.80% 
C) 44.00% 
D) 50.00%

Question 12

The following data are available relating to the performance of Wildcat Fund and the market portfolio:  The risk-free return during the sample period was 7%.
Calculate Treynor's measure of performance for Wildcat Fund.

Accepted Answer

A) 1.00% 
B) 8.80% 
C) 44.00% 
D) 50.00%

Question 13

The following data are available relating to the performance of Sooner Stock Fund and the market portfolio:  The risk-free return during the sample period was 3%.
What is the Treynor measure of performance evaluation for Sooner Stock Fund?

Accepted Answer

A) 1.33% 
B) 4.00% 
C) 8.67% 
D) 9.44%

Question 14

Rodney holds a portfolio of risky assets that represents his entire risky investment.To evaluate the performance of Rodney's portfolio, in which order would you complete the steps listed? I) Compare the Sharpe measure of Rodney's portfolio to the Sharpe measure of the best portfolio.
II) State your conclusions.
III) Assume that past security performance is representative of expected performance.
IV) Determine the benchmark portfolio that Rodney would have held if he had chosen a passive strategy.

Accepted Answer

A) I, III, IV, II 
B) III, IV, I, II 
C) IV, III, I, II 
D) III, II, I, IV

Question 15

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

Accepted Answer

A) in nearly efficient markets, it is extremely difficult for portfolio managers to outperform the market. 
B) the measures usually result in negative performance results for the portfolio managers. 
C) the high rates of return earned by the mutual funds have made the measures useless. 
D) in nearly efficient markets, it is extremely difficult for portfolio managers to outperform the market, and the measures usually result in negative performance results for the portfolio managers.

Question 16

Suppose the risk-free return is 3%.The beta of a managed portfolio is 1.75, the alpha is 0%, and the average return is 16%.Based on Jensen's measure of portfolio performance, you would calculate the return on the market portfolio as

Accepted Answer

A) 12.3%. 
B) 10.4%. 
C) 15.1%. 
D) 16.7%.

Question 17

The following data are available relating to the performance of Wildcat Fund and the market portfolio:  The risk-free return during the sample period was 7%.
Calculate Jensen's measure of performance for Wildcat Fund.

Accepted Answer

A) 1.00% 
B) 8.80% 
C) 44.00% 
D) 50.00%

Question 18

The dollar-weighted return on a portfolio is equivalent to

Accepted Answer

A) the time-weighted return. 
B) the geometric average return. 
C) the arithmetic average return. 
D) the portfolio's internal rate of return.

Question 19

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 Sharpe measure, the performance of Buckeye Fund

Accepted Answer

A) is better than the performance of Gator Fund. 
B) is the same as the performance of Gator Fund. 
C) is poorer than the performance of Gator Fund. 
D) cannot be measured as there are no data on the alpha of the portfolio.

Question 20

The geometric average rate of return is based on

Accepted Answer

A) the market's volatility. 
B) the concept of expected return. 
C) the standard deviation of returns. 
D) the CAPM. 
E) the principle of compounding.

Exam 24: Portfolio Performance Evaluation

The following data are available relating to the performance of Long Horn Stock Fund and the market portfolio: The risk-free return during the sample period was 6%. What is the Sharpe measure of performance evaluation for Long Horn Stock Fund?

The M-squared measure considers

In a particular year, Aggie Mutual Fund earned a return of 15% by making the following investments in the following asset classes: The return on a bogey portfolio was 10%, calculated as follows: The contribution of asset allocation across markets to the total excess return was

Suppose the risk-free return is 4%.The beta of a managed portfolio is 1.2, the alpha is 1%, and the average return is 14%.Based on Jensen's measure of portfolio performance, you would calculate the return on the market portfolio as

The following data are available relating to the performance of Sooner Stock Fund and the market portfolio: The risk-free return during the sample period was 3%. What is the Sharpe measure of performance evaluation for Sooner Stock Fund?

The following data are available relating to the performance of Sooner Stock Fund and the market portfolio: The risk-free return during the sample period was 3%. Calculate the information ratio for Sooner Stock Fund.

The following data are available relating to the performance of Monarch Stock Fund and the market portfolio: The risk-free return during the sample period was 4%. Calculate Sharpe's measure of performance for Monarch Stock Fund.

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

The following data are available relating to the performance of Wildcat Fund and the market portfolio: The risk-free return during the sample period was 7%. What is the information ratio measure of performance evaluation for Wildcat Fund?

The following data are available relating to the performance of Wildcat Fund and the market portfolio: The risk-free return during the sample period was 7%. Calculate Treynor's measure of performance for Wildcat Fund.

The following data are available relating to the performance of Sooner Stock Fund and the market portfolio: The risk-free return during the sample period was 3%. What is the Treynor measure of performance evaluation for Sooner Stock Fund?

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

Suppose the risk-free return is 3%.The beta of a managed portfolio is 1.75, the alpha is 0%, and the average return is 16%.Based on Jensen's measure of portfolio performance, you would calculate the return on the market portfolio as

The following data are available relating to the performance of Wildcat Fund and the market portfolio: The risk-free return during the sample period was 7%. Calculate Jensen's measure of performance for Wildcat Fund.

The dollar-weighted return on a portfolio is equivalent to

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 Sharpe measure, the performance of Buckeye Fund

The geometric average rate of return is based on