For a particular sample period, the risk free rate was 6% and: Portfolio P: Average return=35%; Beta=1.20; Standard Deviation=40%; Tracking Error (nonsystematic risk)=20% Market M: Average return=30%; Beta=1.00; Standard Deviation=30%; Tracking error=0
A) For both the portfolio and the market calculate the Sharpe ratio, the Treynor ratio and the information ratio.
B) Why should the Sharpe measure only be used to judge the performance of a well-diversified portfolio?
For a particular sample period, the risk free rate was 6% and: Portfolio P: Average return=35%; Beta=1.20; Standard Deviation=40%; Tracking Error (nonsystematic risk)=20% Market M: Average return=30%; Beta=1.00; Standard Deviation=30%; Tracking error=0
A) For both the portfolio and the market calculate the Sharpe ratio, the Treynor ratio and the information ratio.
B) Why should the Sharpe measure only be used to judge the performance of a well-diversified portfolio?
Related questions
For the questions, use the following averages and covariance matrix. PLEASE HELP ASAP! ROUND to 2 decimal places
EQUATION NEEDED FOR 8)=
Sharpe ratio for the portfolio = (Return on the portfolio-Risk Free Rate/standard deviation of the portfolio
Averages
| Asset | 1 | 2 | 3 |
| Returns | 0.25 | 0.12 | 0.08 |
covariance matrix
| Asset 1 | Asset 2 | Asset 3 | ||
| Asset 1 | 0.4 | -0.1 | 0.2 | |
| Asset 2 | -0.1 | 0.7 | 0.3 | |
| Asset 3 | 0.2 | 0.3 | 0.9 |
5.) Calculate the average of a portfolio formed by 35% in asset 1 and 65% in asset 2.
6.) Calculate the variance of a portfolio formed by 35% in asset 1 and 65% in asset 2.
7.) Using the variance from question 6, calculate the standard deviation for the portfolio formed by 35% in asset 1 and 65% in asset 2.
8.) Using the average and standard deviation from previous questions, calculate the Sharpe ratio for the portfolio formed by 35% in asset 1 and 65% in asset 2.
9.) Which of the portfolios offer greater return per unit of risk taken?
a. The portfolio formed by 30% in asset 2 and 70% in asset 3
b. The portfolio formed by 35% in asset 1 and 65% in asset 2
c. Both give the same return per unit of risk
PLEASE ANSWER ALL QUESTIONS!!!!!!!!
NOTE: For SHARP RATIO, assume the risk free rate to be 0
PLEASE ROUND TO 2 DECIMALS! THANK YOU
AVERAGES
| sp500 | A | B | |
| Average | -0.0069 | 0.0018 | 0.0015 |
covariance matrix:
| Sp500 | A | B | |
| Sp500 | 0.00336 | ||
| A | 0.00322 | 0.0041 | |
| B | 0.0044 | 0.00514 | 0.00824 |
For a portfolio formed by 40% in the SP500 and 60% in A. Calculate the return on the portfolio.
8.) Using the covariance matrix from question 7, calculate the variance of the portfolio formed by 40% in the SP500 and 60% in A.
9.) Using the variance from question 8, calculate the standard deviation of the portfolio formed by 40% in the SP500 and 60% in A.
10.) Using the average and standard deviation from previous questions, calculate the Sharpe ratio for the portfolio formed by 40% in the SP500 and 60% in A.
11.) Using the averages from question 7, calculate the average of a portfolio formed by 30% in A and 70% in B.
12.) Using the covariance matrix from question 7, calculate the variance of a portfolio formed by 30% in A and 70% in B.
13.) Using the variance from question 12, calculate the standard deviation for the portfolio formed by 30% in A and 70% in B.
14.) Using the average and standard deviation from previous questions, calculate the Sharpe ratio for the portfolio formed by 30% in A and 70% in B.
15.) Which of the portfolios offer greater return per unit of risk taken?
A. The portfolio formed by 30% in A and 70% in B
B. portfolio formed by 40% in the SP500 and 60% in A
c. Both give the same return per unit of risk
For the questions, use the following averages and covariance matrix. PLEASE HELP ASAP!
Averages
| Asset | 1 | 2 | 3 |
| Returns | 0.25 | 0.12 | 0.08 |
covariance matrix
| Asset 1 | Asset 2 | Asset 3 | ||
| Asset 1 | 0.4 | -0.1 | 0.2 | |
| Asset 2 | -0.1 | 0.7 | 0.3 | |
| Asset 3 | 0.2 | 0.3 | 0.9 |
1.) For a portfolio formed by 30% in asset 2 and 70% in asset 3. Calculate the return on the portfolio.
2.) Calculate the variance of the portfolio formed by 30% in asset 2 and 70% in asset 3.
3.) Using the variance from question 3b, calculate the standard deviation of the portfolio formed by 30% in asset 2 and 70% in asset 3.
4.) Using the average and standard deviation from previous questions, calculate the Sharpe ratio for the portfolio formed by 30% in asset 2 and 70% in asset 3.
5.) Calculate the average of a portfolio formed by 35% in asset 1 and 65% in asset 2.
6.) Calculate the variance of a portfolio formed by 35% in asset 1 and 65% in asset 2.
7.) Using the variance from question 3f, calculate the standard deviation for the portfolio formed by 35% in asset 1 and 65% in asset 2.
8.) Using the average and standard deviation from previous questions, calculate the Sharpe ratio for the portfolio formed by 35% in asset 1 and 65% in asset 2.
9.) Which of the portfolios offer greater return per unit of risk taken?
a. The portfolio formed by 30% in asset 2 and 70% in asset 3
b. The portfolio formed by 35% in asset 1 and 65% in asset 2
c. Both give the same return per unit of risk
