VBK QQQ 0.076 0.056 Standard deviation of excess returns Residual standard deviation Multi-factor model regression 0.03 0.04 0.001 +0.974 X MRP + 0.428 X SMB -0.177 X HML +0.01 X MOM + 0.200 X BAB -0.257 X OMI 0.003 + 1.125 X MRP +0.117 XSMB -0.612 X HML -0.018 X MOM -0.212 X BAB + 0.109 X OMI 63% 69% Further information about factor retums (monthly frequency): Factor Market excess retum (MRP) Small minus big (SMB) High minus low (HML) Winner minus loser (MOM) Low-beta-bias (BAB) Quality minus Junk (QMJ) Average Return 0.005 0.002 0.001 0.003 0.006 0.005 Standard deviation of returns 0.04 0.03 0.03 0.05 0.04 0.03 Assuming all the factors are uncorrelated. A. Calculate the funds' annual excess returns. (2.5 marks) B. Calculate the funds' annual Sharpe and Treynor ratios. (2.5 marks) C. Calculate the finds' annual Jensen alpha and information ratios using the multi-factor model as the benchmark (2.5 marks) D. Do the finds achieve their objective of tracking the performance of small and growth firms? Explain your answer. (2.5 marks) VBK QQQ 0.076 0.056 Standard deviation of excess returns Residual standard deviation Multi-factor model regression 0.03 0.04 0.001 +0.974 X MRP + 0.428 X SMB -0.177 X HML +0.01 X MOM + 0.200 X BAB -0.257 X OMI 0.003 + 1.125 X MRP +0.117 XSMB -0.612 X HML -0.018 X MOM -0.212 X BAB + 0.109 X OMI 63% 69% Further information about factor retums (monthly frequency): Factor Market excess retum (MRP) Small minus big (SMB) High minus low (HML) Winner minus loser (MOM) Low-beta-bias (BAB) Quality minus Junk (QMJ) Average Return 0.005 0.002 0.001 0.003 0.006 0.005 Standard deviation of returns 0.04 0.03 0.03 0.05 0.04 0.03 Assuming all the factors are uncorrelated. A. Calculate the funds' annual excess returns. (2.5 marks) B. Calculate the funds' annual Sharpe and Treynor ratios. (2.5 marks) C. Calculate the finds' annual Jensen alpha and information ratios using the multi-factor model as the benchmark (2.5 marks) D. Do the finds achieve their objective of tracking the performance of small and growth firms? Explain your answer. (2.5 marks)