chey.eduautourse DQuestion 6 An asset manager has constructed two portfolios, Zeus and Poseidon, that performed as follows in the last 5 years Poseidon Zeus 25% Realised return (annual) Standard deviation (annual) Beta 0.8 1.3 The average return on the S&P500 index was 17% p.a. with a risk (standard deviation) of 18% p.a. The average rate during the period analysed was 2% p.a. Based on expected returns using the CAPM, what is the alpha of Zeus and Poseidon? [2 marks] 4 b) What are the Treynor ratios for Zeus and Poseidon in the period analysed? If you currently hold a well- diversified portfolio, would you choose to add eitner of these portfolios to your holdings? Explain. [4 marks] c) What are the Sharpe ratios for Zeus and Poseidon in the period analysed? If you could only invest in a combination of i) risk-free asset and ii) one of the two risky portfolios (Zeus or Poseidon), would your answer to part by change? Explain. [4 marks] 15% 10% 24%