Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

QUESTION 3 HAS THREE PARTS (A, B, C) FOR A TOTAL OF 15 MARKS Porsak Theepakorn is a wealthy Thai businessman who wants to know

image text in transcribedimage text in transcribed

QUESTION 3 HAS THREE PARTS (A, B, C) FOR A TOTAL OF 15 MARKS Porsak Theepakorn is a wealthy Thai businessman who wants to know the performance of his investment account over the past year. Although the account is managed by an external investment manager, Theepakorn has full control over the timing and size of cash flows being invested or withdrawn from the account. The following table shows month-end cash flows and value of Theepakorn's account in millions of USD: Month-Year Month-end Cash Flow Month-end Value (including month-end in USD millions cash flow) in USD millions Dec 2018 90 Mar 2019 100 Jun 2019 5 110 Sep 2019 120 230 Dec 2019 -30 250 A. Calculate the time-weighted return of Theepakorn's investment account for the year 2019. [7 MARKS] Theepakorn meets with his private wealth advisor (PWA) to explore investment opportunities with equity fund managers. His PWA presents data to evaluate the historical performance of each manager based on the following criteria: Criterion 1: Reward per unit of systematic risk Criterion 2: Reward per unit of total risk Both managers achieved 18% rate of return over the past year, and the risk-free rate is 2%. The following table shows the performance measures of managers 1 and 2: Performance Measure Manager 1 Manager 2 Sharpe ratio 1.02 1.05 Information ratio 1.38 0.72 Treynor ratio 16.67 14.95 Sortino ratio 0.52 0.50 B. Based on criterion 1, select the appropriate performance measure and explain the source of difference between the two managers. [4 MARKS] C. Based on criterion 2, select the appropriate performance measure and explain the source of difference between the two managers. [4 MARKS]

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

Finance And Financial Markets

Authors: Keith Pilbeam

3rd Edition

023023321X, 978-0230233218

More Books

Students also viewed these Finance questions

Question

What is a pure discount bond?

Answered: 1 week ago

Question

3. Identify challenges to good listening and their remedies

Answered: 1 week ago

Question

4. Identify ethical factors in the listening process

Answered: 1 week ago