Purchase Solution

Formula to find the portfolio return for the year

Not what you're looking for?

Ask Custom Question

Find 5 actively traded stocks and record their prices at the start and the end of the most recent calendar year. Also, find the amount of dividends paid on each stock during that year and each stock's beta at the end of the year. Assume that the 5 stocks were held during the year in an equal dollar weighted portfolio (20% in each stock) created at the start of the year. Also find the current risk free rate and the market return for the given year. Assume that the standard deviation for the portfolio of the 5 stocks is 14.25% and that the standard deviation for the market portfolio is 10.80%
a) Use the formula to find the portfolio return for the year under consideration.
b) Calculate Sharpe's measure for both the portfolio and the market. Compare and discuss these values. On the basis of this measure, is the portfolio's performance inferior or superior? Explain.
c) Calculate Treynor's measure for both the portfolio and the market. Compare and discuss these values. On the basis of this measure, is the portfolio's performance inferior or superior? Explain.
d) Calculate Jensen's measure (Jensen's alpha) for the portfolio. Discuss its value. On the basis of this measure, is the portfolio's performance inferior or superior? Explain.
e) Compare, contrast, and discuss your analysis using the 3 measures in parts b, c and d. Evaluate the portfolio.

Purchase this Solution
Solution Summary

The solution examines formulas to find the portfolio return for the year. The value for portfolio and the market is measured, compared and discussed.

Purchase this Solution
Free BrainMass Quizzes
Social Media: Pinterest

This quiz introduces basic concepts of Pinterest social media

Understanding the Accounting Equation

These 10 questions help a new student of accounting to understand the basic premise of accounting and how it is applied to the business world.

Basic Social Media Concepts

The quiz will test your knowledge on basic social media concepts.

Understanding Management

This quiz will help you understand the dimensions of employee diversity as well as how to manage a culturally diverse workforce.

Academic Reading and Writing: Critical Thinking

Importance of Critical Thinking

View More Free Quizzes
Related BrainMass Solutions

  • Measuring Strengths, and Weaknesses in Managing a Portfolio

    It is the simplest way to find out the expected/required rate of return of a portfolio for an investor. Here if the Jensen's measure is positive the investment on portfolio is said to be outperformed.

  • Required return, portfolio beta,stock price, dividend yield

    The Lashgari Company is expected to pay a dividend of $1 per share at the end of the year, and that dividend is expected to grow at a constant rate of 5% per year in the future.

  • Capital Asset Pricing Model

    The formula used for CAPM is shown below: Ke= Rf+B*(Km-Rf) Where: ? Ke = Required return on common stock ? Rf = Risk-free rate of return; usually the current rate on Treasury bill securities ?

  • Calculate the Cost of Equity Capital (CARM)

    For the CAPM, you can find the company's beta at finance.google.com. Use 10% as the expected return on the market portfolio.

  • Calculating Beta - Choices

    The risk-free rate is 7 percent. Last year this portfolio had a required rate of return of 13 percent. This year nothing has changed except for the fact that the market risk premium has increased by 2 percent (two percentage points).

  • Portfolio required return

    this equation as above to find Rm the market return.

  • What the impact on risk and return would be (the correlation here is .09).

    Let's call Ra to the return of asset A, Rb to the return of asset B, 'a' to the fraction of the portfolio that corresponds to asset A (for example, 0.3 if it is 30%) and 'b' to the fraction of the portfolio that corresponds to asset B.

  • Finance: Annuity Review Questions

    What is the beta for your portfolio if 40% of your funds are invested in the treasury securities? Find the beta of a portfolio of three stocks. One third of the portfolio is invested in each of the three stocks.

  • Student loan calculations

    Find the expected return, standard deviation of returns, and coefficient of variation for each firm. B. Find the expected return on a portfolio composed of 75% Times shares and 25% Sun shares. 10.

View More Related Solutions