18.13

Kelli Blakely is a portfolio manager for the Miranda Fund, a core large-cap equity fund. The benchmark for performance measurement purposes is the S&P 500. Although the Miranda portfolio generally mirrors the asset class and sector weightings of the S&P, Blakely is allowed a significant amount of leeway in managing the fund.

Blakely was able to produce exceptional returns last year (as outlined in the table below) through her market timing and security selection skills. At the outset of the year, she became extremely concerned that the combination of a weak economy and geopolitical uncertainties would negatively impact the market. Taking a bold step, she changed her market allocation. For the entire year her asset class exposures averaged 50% in stocks and 50% in cash. The S&Ps allocation between stocks and cash during the period was a constant 97% and 3%, respectively. The risk-free rate of return was 2%.

One-Year Trailing Returns
	Miranda Fund	S&P 500
Return	10.2%	22.5%
Standard deviation	37%	44%
Beta	1.10	1.00

Required:

a. What are the Sharpe ratios for the Miranda Fund and the S&P 500? (Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Round your answers to 4 decimal places.)

b. What are the M² measures for Miranda and the S&P 500? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

c. What is the Treynors measure for the Miranda Fund and the S&P 500? (Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Round your answers to 4 decimal places.)

d. What is the Jensen measure for the Miranda Fund? (Do not round intermediate calculations. Round your answer to 2 decimal places.)