Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Please solve in excel with formula and solve all the questions Problem 2 (8 points): You are an analyst for a large public pension fund

Please solve in excel with formula and solve all the questions

image text in transcribed

Problem 2 (8 points): You are an analyst for a large public pension fund and you have been assigned the task of evaluating two different external portfolio managers (Y and Z). You consider the following historical average return, standard deviation, and CAPM beta estimates for these two managers over the past five years: Portfolio Manager Y Manager Z Actual Avg. Return 10.20% 8.80 Standard Deviation Beta 12.00% 1.20 9.90 0.8 Additionally, your estimate for the risk premium for the market portfolio is 5.00 percent and the risk- free rate is currently 4.50 percent. a) For both Manager Y and Manager Z, calculate the expected return using the CAPM. Express your answers to the nearest basis point (xx.xx percent). b) Calculate each fund manager's average "alpha" (actual return minus expected return) over the five-year holding period. Show graphically where these alpha statistics would plot on the security market line (SML). c) Explain whether you can conclude from the information in part (b) if (1) either manager outperformed the other on a risk-adjusted basis, and (2) either manager outperformed market expectations in general

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Healthcare Finance An Introduction To Accounting And Financial Management

Authors: Louis C. Gapenski

5th Edition

1567934250, 978-1567934250

More Books

Students also viewed these Finance questions