35. The average returns, standard deviations, and betas for three funds are give

Question

35. The average returns, standard deviations, and betas for three funds are given below along with data for the S&P; 500 Index. The risk-free return during the sample period is FundAvg Std Dev Beta 140% 125% | 30% 115% .A 13.6% 131% | 12.4% |120% 1.0 13 C S&P; 500 u want to evaluate the three mutual funds using the Treynor measure for performance evaluation. The fund with the highest Treynor measure of performance is A. Fund A: B. Fund B; C Fund C D.A & B are tied; E.B&Care; tied. 36. The average returns, standard deviations, and betas for three funds are given below along with data for the S&P; 500 Index. The risk-free return during the sample eriod is 6 uT SAP 500205 You want to evaluate the three mutual funds using the Jensen measure for performance evaluation. The fund with the highest Jensen measure of performance is A. Fund A: B. Fund B C Fund C D.A& B are tied: E. B & Care tied. 15% 10 37. Omega Mutual Fund earned the following 3 annual rates of return: 11%;-996, 20% What average annual rate of return is Omega entitled to advertise in newspapers? A 6.6296; B, 6.8096; 6.94%; D.7.15; E733% 38. The proper formula for international interest rate parity is A. [1+ rfforeign))/[1+r(US)]-F/E B. [1 + r (US) I/[1 + r(foreign)]-EO/A C[1+r(US)/11+ rfforeign)] Fo/E E [1+US)I/+r(US)]-Eo/F 39. A fund has assets denominated in euros and liabilities in yen due in 6 months. The 6 month forward rate for the euro is $1.36 per euro, and the 6-month forward rate for the rdollar.The 6-month forward rate for the euro versus the yen should 176.22 154 67, D. x16456;

Explanation / Answer

Highest traynor ratio is for B while the highest jensen'salpha is for A

Hence 35 B

36 A

37 Average return is 7.33% so that can be advertised

38 by definition

(1 + id) = (S / F) * (1 + if)

Where:

id is the interest rate in the domestic currency, or the base currency

if is the interest rate in the foreign currency, or the quoted currency

S is the current spot foreign exchange rate

F is the forward foreign exchange rate

Hence B

$A$1 Formula Fund Avg Std Dev Beta Avg-rf rate Treynor Avg-rf rate Treynor A 13.60% 40% 1.1 7.600% 0.069 =B3-6% =E3/D3 B 13.10% 25% 1 7.100% 0.071 =B4-6% =E4/D4 C 12.40% 30% 1.3 6.400% 0.049 =B5-6% =E5/D5 S&P 500 12.00% 15% 1 6.000% 0.060 =B6-6% =E6/D6 Fund Avg Std Dev Beta CAPM Jensen Avg-rf rate Treynor A 14.60% 40% 1.1 0.126 2.00% =0.06+(0.12-0.06)*D9 =B9-E9 B 13.10% 25% 1 0.12 1.10% =0.06+(0.12-0.06)*D10 =B10-E10 C 12.40% 30% 1.3 0.138 -1.40% =0.06+(0.12-0.06)*D11 =B11-E11 S&P 500 12.00% 15% 1 0.12 0.00% =0.06+(0.12-0.06)*D12 =B12-E12

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