Reference no: EM132959266
Question - Friend Investments (FI) is an actively managed equity fund. Over the past three years, FI has earned an average annual return of 23.3% before management costs. The average annual return on the market index over the same period was 6.6% and average annual risk-free return 0.4%.
FI is classified as a high risk fund whose annual variance of returns is 0.2457, compared to a market annual variance of 0.0241. The correlation coefficient between FI and market returns is 0.6188.
Required -
a) Calculate FI's beta value and use the Capital Asset Pricing Model to produce an expected annual return for FI. Comment on the relation between FI's actual and expected annual return.
b) Calculate the Sharpe ratio, the Treynor ratio for FI and the market, together the Jensen alpha for FI. Use the results to assess the performance of FI given that it is an actively managed fund.
c) Undertake a Fama decomposition of FI's return and make a leveraged investment in the market portfolio that replicates the risk of FI. Discuss the extent to which FI's performance can be explained by fund management skills.
d) With reference to FI's performance over the last three years, analyze the idea that investors ought to seek fund managers who have a track record of positive alpha returns.
|
How much revenue should shark bait recognize
: On June 3, X1, Shark Bait Inc sells fish food to Nemo Inc. for $310,000. How much revenue should Shark Bait recognize for the sale that occurred on June 3rd
|
|
Compute the current yield and YTC on the issue
: Compute the current yield, YTM, and YTC on this issue, given that it is currently being priced in the market at $1,250. Which of these 3 yields is the highest?
|
|
What amount of gain on biological asset should be reported
: Increase in fair value due to growth and price change 2,000,000. What amount of gain on biological asset should be reported in the current year
|
|
Why understand stock valuation so important for business
: Why is understanding stock valuation so important for businesses? Explain at least one method used and the pro's as well as the con's of the valuation.
|
|
Calculate the sharpe ratio
: Calculate the Sharpe ratio, the Treynor ratio for FI and the market, together the Jensen alpha for FI. Use the results to assess the performance of FI given
|
|
Identify and calculation of capital gains tax
: Identify and calculation of capital gains tax (CGT), including CGT event A1 happening on disposal of an asset, the CGT discounts, the CGT consequences of death
|
|
What is cloud peak holding period in contributed property
: What is Cloud Peak's holding period in the contributed property? Lance contributed investment property worth $745,000, purchased three years ago
|
|
Prepare computech balance sheet as at december
: Prepare CompuTech's Balance Sheet as at December 31, 2021. Prepare CompuTech's Income Statement for the year ended, December 31, 2021.
|
|
What are the types of subsequent events
: What are the types of subsequent events. Who are the responsible parties and their roles/actions that should be taken for a subsequent event
|