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Exam 18: Evaluating Investment Performance

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Question 31

Multiple Choice

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The Modigliani M2 measure and the Treynor T2 measure

A) are identical.
B) are nearly identical and will rank portfolios the same way.
C) are nearly identical, but might rank portfolios differently.
D) are somewhat different; M2 can be used to rank portfolios, but T2 cannot.
E) are somewhat different; T2 can be used to rank portfolios, but M2 cannot.

F) A) and B)
G) None of the above

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Question 32

Multiple Choice

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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.

A) 0.01
B) 0.088
C) 0.44
D) 0.50
E) 0.61

F) A) and B)
G) B) and E)

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Question 33

Multiple Choice

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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

The M-squared measure considers

Suppose you buy 100 shares of Abolishing Dividend Corporation at the beginning of year 1 for $80. Abolishing Dividend Corporation pays no dividends. The stock price at the end of year 1 is $100, $120 at the end of year 2, and $150 at the end of year 3. The stock price declines to $100 at the end of year 4, and you sell your 100 shares. For the four years, your geometric average return is

Suppose you purchase one share of the stock of Cereal Correlation Company at the beginning of year 1 for $50. At the end of year 1, you receive a $1 dividend and buy one more share for $72. At the end of year 2, you receive total dividends of $2 (i.e., $1 for each share) and sell the shares for $67.20 each. The dollar-weighted return on your investment is

Suppose you own two stocks, A and B. In year 1, stock A earns a 2% return and stock B earns a 9% return. In year 2, stock A earns an 18% return and stock B earns an 11% return. Which stock has the higher geometric average return?

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?

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 total excess return on the Aggie managed portfolio was

Suppose two portfolios have the same average return and the same standard deviation of returns, but Buckeye Fund has a lower beta than Husker Fund. According to the Treynor measure, the performance of Buckeye 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?

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 Jensen 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 Long Horn Stock Fund and the market portfolio: The risk-free return during the sample period was 6%. Calculate the information ratio for Long Horn Stock Fund.

The comparison universe is

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 Buckeye Fund has a higher beta than Husker Fund. According to the Treynor measure, the performance of Buckeye Fund

Suppose two portfolios have the same average return and the same standard deviation of returns, but Buckeye Fund has a lower beta than Husker Fund. According to the Sharpe measure, the performance of Buckeye Fund

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 time-weighted return on your investment is

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%. Calculate the Jensen measure of performance evaluation for Long Horn Stock Fund.