Question
Over the past year your portfolio return was 12 percent, standard deviation of returns was 18 percent, beta was 1.2, the risk-free rate was 3
Over the past year your portfolio return was 12 percent, standard deviation of returns was 18 percent, beta was 1.2, the risk-free rate was 3 percent and the market risk premium 7 percent.
- Based on the capital asset pricing model (CAPM) what is the return that you should have expected to earn on this portfolio? (4 pts)
- Compute and interpret the Sharpe measure and Treynor measures for this portfolio. (6 pts)
- Did your portfolio beat the market on a risk-adjusted basis? Explain. (5 pts)
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Contemporary Financial Management
Authors: R. Charles Moyer, James R. McGuigan, Ramesh P. Rao
14th edition
1337090581, 978-1337090582
