Question 2 [21 marks in total] Using the past twelve months return data, the monthly average returns and standard deviations for two portfolios, P& Q, and the benchmark index portfolio B are listed below. The monthly risk-free interest is 0.5%. Return of Portfolio, P 2.780% Return of Portfolio, Q Return of Benchmark, B 4.340% 1.630% Monthly Average Monthly Standard Deviation 6.4477% 13.7477% 8.839% Graphs of linear regression of the monthly returns of portfolios Pand Q against benchmark portfolio, B, are shown below. I y = 1.5191x + 0.0186 R? -0.911 . R' 0.954 : y 0.6962x + 0.0165 30 . 200 -15% SN 30 -15% SN Returnenchmark, Returna Benchmark, a) State the formula of the following performance statistics and calculate their numerical answers using monthly data. (15 marks) Formula (say, for Portfolio P) Portfolio P Portfolio 2 Sharpe Ratio Choose one of the below: A) 0.6962 (i.e. slope) Beta* B) 0.0165 (i.e. Intorcept) C) 0.911 (e. coeff, of determination) Alpha Treynor Measure Residual standard 1.924% 2.653% deviation, o(e) Information Ratio *Beta can be read from graphs of linear regression. b) If Por Q represents the entire investment fund, which portfolio is more attractive based on the performance statistics? Explain your rationale. (2 marks) ... c) If P and Q are competing for a role as one of a number of subportfolios, which portfolio dominates? Explain your rationale. (2 marks) d) If P and Q will be chosen as an active portfolio to be mixed with the index portfolio, which portfolio is more suitable? Explain your rationale. (2 marks)