1. Assume a particular stock has an annual standard deviation of 55 percent. Wha
ID: 2717560 • Letter: 1
Question
1. Assume a particular stock has an annual standard deviation of 55 percent. What is the standard deviation for a 2-month period? (Round your answer to 2 decimal place. Omit the "%" sign in your response.)
Standard deviation
%
2. Consider the following information concerning three portfolios, the market portfolio, and the risk-free asset:
Portfolio
RP
P
P
X
12.5
%
38
%
1.45
Y
11.5
33
1.15
Z
9.4
23
.80
Market
11.9
28
1.00
Risk-free
6.2
0
0
What is the Sharpe ratio, Treynor ratio, and Jensen’s alpha for each portfolio? (Round your Sharpe ratio answer and Treynor ratio answer to 5 decimals and Jensen's alpha answers to 3 decimal places. Negative amounts should be indicated by a minus sign. Omit the "%" sign in your response.)
Portfolio
Sharpe ratio
Treynor ratio
Jensen's alpha
X
%
Y
%
Z
%
Market
%
3. Consider the following information concerning three portfolios, the market portfolio, and the risk-free asset:
Portfolio
RP
P
P
X
14
%
20
%
1.8
Y
13
15
1.3
Z
9.2
5
0.85
Market
11.1
10
1
Risk-free
6.6
0
0
Assume that the tracking error of Portfolio X is 10.6 percent. What is the information ratio for Portfolio X? (Round your answer to 4 decimal place.)
Information ratio
4. Consider the following information concerning three portfolios, the market portfolio, and the risk-free asset:
Portfolio
RP
P
P
X
12.5
%
34
%
1.5
Y
11.5
29
1.20
Z
7.1
19
0.8
Market
10.5
24
1
Risk-free
6.2
0
0
Assume that the correlation of returns on Portfolio Y to returns on the market is 0.68. What is the percentage of Portfolio Y’s return that is driven by the market? (Round your answer to 2 decimal places. Omit the "%" sign in your response.)
Y’s return explained by market
%
1. Assume a particular stock has an annual standard deviation of 55 percent. What is the standard deviation for a 2-month period? (Round your answer to 2 decimal place. Omit the "%" sign in your response.)
Explanation / Answer
1.Monthly standard deviation=Annual standard deviation/Square root of 12 months
=55%/Square root of 12 months
=15.88
=(12.5-6.2)/1.45
4.3
=(11.5-6.2)/1.15
4.6
=(9.4-6.2)/0.8
4.0
Sharp Ratio (Rp-Rf)/risk of portfolio Rp Return of portfolio Rf Risk free return Portfoilio X Y Z =(12.5-6.2)/38 =(11.5-6.2)/33 =(9.4-6.2)/23 0.165789473684211 0.160606060606061 0.139130434782609 Treynor ratio (Rp-Rf)/BETA of portfolio Portfoilio X Y Z=(12.5-6.2)/1.45
4.3
=(11.5-6.2)/1.15
4.6
=(9.4-6.2)/0.8
4.0
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