MSI is considering two investment strategies:
60% in Healthcare Fund and 40% in Inverse ETF.
60% in Healthcare Fund and 40% in Biotech Fund.
Calculate the stand-alone risk () and coefficient of variation (CV) of these two portfolios.
Case 12: Mid-Atlantic Specialty, Inc. 1-Year Probability TB Healthcare Inverse Fund ETF 85 Stone the Enamy Bitech Fund 0.1 S&P 500 --8% 02 18% 2% 23% Poor Below average Average Above average Excellent EXHIBIT 121 Mid-Atlantic Specialty Int: Exumated One-Year Pation Distributions on Four investments and the S&P 500 7% 7% 7% 7% 7% 0.4 0.2 0.1 14% 25% 33% 7% -3% 2% 0% 13% 31% 50% 0% 15% 30% 45 P. Standard & Poor's, Tbil: Treasury bill exchange-traded rund 500 Standard & Poorte 1-Year T-Bill Healthcare Fund Inverse Biotech ETE Fund S&P 500 7% EXHIBIT 122 Mid-Atlantic Specialty Inc: Historical Return Distributions on Four Investments and the -8% 2% 14% 25% 33% 7% 7% 18% 23% 7% -3% -19% 0% 13% 31% 50% -15% 0% 15% 30% 7% S&P 500 7% 2% CF exchange-traded fund, S&P Standard & Poor's, T-bill: Treasurya These return distributions are fictitious and not meant to describe actual market conditions at the time you work this case. CASE MID-ATLANTIC SPECIALTY, INC 12 FINANCIAL RISK MID-ATLANTIC SPECIA by physicians in the Col Atlantic, with more than 600 University Hospital. In addi TIC SPECIALTY., Inc., is a not-for-profit corporation formed s in the College of Medicine at Mid-Atlantic University, Mid- with more than 600 physicians, provides the medical staff for sity Hospital. In addition, Mid-Atlantic staffs and administers k of 25 ambulatory care clinics and centers at ten locations within 50 of University Hospital. In 2017, Mid-Atlantic generated more than million in revenues from about 40,000 inpatient stays and 750,000 outpatient visits. More than 70 percent of Mid-Atlantic's revenues currently come from inpatient stays, but this percentage has been declining, by 2018, more than half of Mid-Atlantic's revenues are expected to stem from outpatient services As improvements are made in technology and as third-party payers continue to pressure providers to cut costs, more and more inpatient services will be converted to outpatient and home care. For example, in 2007, 80 percent of Mid-Atlantic's ophthalmological surgeries took place in University Hospital, whereas in 2017, 80 percent were performed in outpatient settings. Although Mid-Atlantic has traditionally provided only specialty ser- vices, in 2017 it instituted a "personal physician services" program, in which patients can receive both primary and specialty care from College of Medi- cine physicians. This was the first step in Mid-Atlantic's drive to develop an integrated delivery system, which offers a full range of patient services. Now that the system is in place, Mid-Atlantic is contracting with man- aged care plans to provide virtually all physician services required locally y plan members. Furthermore, Mid-Atlantic is examining the feasibility of contracting directly with employers, and hence bypassing managed care dation of ACHE 2018 Reproduction without permission is prohibited Finan de Indeed, state insura, the idea when Mid-A wance in 2-Adanti ins. The insurance in e industry State the Ed Cases in Healthcare Find de a com be undertako h employers to provide a oce function, which can be ossibility of direct contracting, Ben but no decision has yet been ma representatives expressed opposition announced the possibility of n. Mid-Atlantic holds which various staff mer nonclinical topics of holds monthly aff members es of interest Poor Bolov Avere Aboy hief financial office Exce sition is that direct contracting with cm healthcare benefit package is an insurance only by licensed insurance plans. As part of its continuing education program nonclinical grand rounds for its phy Mid-Atlantic's chief finan on the financial risk inh risk inherent in ETF s, although standing of basic and rounds for its physicians, in which and outside specialists conduct seminars on non As part of this series, Chris Johnson, Mid-Adam has been invited to conduct two sessions on the integrated delivery systems. His main concern is a very sophisticated in clinical matters, have a limin financial risk concepts and will not appreciate the is that physicians, alth ve a limited understanding of te the financial issues invol + gaining an understanding erstanding of wote the entire first session e identified four investment interrated delivery systems without first gaining ocial risk fundamentals. Thus, he plans to devote the to basic concepts In preparation for the seminar, Chris has identifier for Mid-Atlantic to consider: Case 12: Mid-Atlantic Specialty, Inc. 1-Year Probability TB Healthcare Inverse Fund ETF 85 Stone the Enamy Bitech Fund 0.1 S&P 500 --8% 02 18% 2% 23% Poor Below average Average Above average Excellent EXHIBIT 121 Mid-Atlantic Specialty Int: Exumated One-Year Pation Distributions on Four investments and the S&P 500 7% 7% 7% 7% 7% 0.4 0.2 0.1 14% 25% 33% 7% -3% 2% 0% 13% 31% 50% 0% 15% 30% 45 P. Standard & Poor's, Tbil: Treasury bill exchange-traded rund 500 Standard & Poorte 1-Year T-Bill Healthcare Fund Inverse Biotech ETE Fund S&P 500 7% EXHIBIT 122 Mid-Atlantic Specialty Inc: Historical Return Distributions on Four Investments and the -8% 2% 14% 25% 33% 7% 7% 18% 23% 7% -3% -19% 0% 13% 31% 50% -15% 0% 15% 30% 7% S&P 500 7% 2% CF exchange-traded fund, S&P Standard & Poor's, T-bill: Treasurya These return distributions are fictitious and not meant to describe actual market conditions at the time you work this case. CASE MID-ATLANTIC SPECIALTY, INC 12 FINANCIAL RISK MID-ATLANTIC SPECIA by physicians in the Col Atlantic, with more than 600 University Hospital. In addi TIC SPECIALTY., Inc., is a not-for-profit corporation formed s in the College of Medicine at Mid-Atlantic University, Mid- with more than 600 physicians, provides the medical staff for sity Hospital. In addition, Mid-Atlantic staffs and administers k of 25 ambulatory care clinics and centers at ten locations within 50 of University Hospital. In 2017, Mid-Atlantic generated more than million in revenues from about 40,000 inpatient stays and 750,000 outpatient visits. More than 70 percent of Mid-Atlantic's revenues currently come from inpatient stays, but this percentage has been declining, by 2018, more than half of Mid-Atlantic's revenues are expected to stem from outpatient services As improvements are made in technology and as third-party payers continue to pressure providers to cut costs, more and more inpatient services will be converted to outpatient and home care. For example, in 2007, 80 percent of Mid-Atlantic's ophthalmological surgeries took place in University Hospital, whereas in 2017, 80 percent were performed in outpatient settings. Although Mid-Atlantic has traditionally provided only specialty ser- vices, in 2017 it instituted a "personal physician services" program, in which patients can receive both primary and specialty care from College of Medi- cine physicians. This was the first step in Mid-Atlantic's drive to develop an integrated delivery system, which offers a full range of patient services. Now that the system is in place, Mid-Atlantic is contracting with man- aged care plans to provide virtually all physician services required locally y plan members. Furthermore, Mid-Atlantic is examining the feasibility of contracting directly with employers, and hence bypassing managed care dation of ACHE 2018 Reproduction without permission is prohibited Finan de Indeed, state insura, the idea when Mid-A wance in 2-Adanti ins. The insurance in e industry State the Ed Cases in Healthcare Find de a com be undertako h employers to provide a oce function, which can be ossibility of direct contracting, Ben but no decision has yet been ma representatives expressed opposition announced the possibility of n. Mid-Atlantic holds which various staff mer nonclinical topics of holds monthly aff members es of interest Poor Bolov Avere Aboy hief financial office Exce sition is that direct contracting with cm healthcare benefit package is an insurance only by licensed insurance plans. As part of its continuing education program nonclinical grand rounds for its phy Mid-Atlantic's chief finan on the financial risk inh risk inherent in ETF s, although standing of basic and rounds for its physicians, in which and outside specialists conduct seminars on non As part of this series, Chris Johnson, Mid-Adam has been invited to conduct two sessions on the integrated delivery systems. His main concern is a very sophisticated in clinical matters, have a limin financial risk concepts and will not appreciate the is that physicians, alth ve a limited understanding of te the financial issues invol + gaining an understanding erstanding of wote the entire first session e identified four investment interrated delivery systems without first gaining ocial risk fundamentals. Thus, he plans to devote the to basic concepts In preparation for the seminar, Chris has identifier for Mid-Atlantic to consider
