Y9

QUESTION ONE

Chanda Mulenga, an investor, is interested in evaluatingg the performance of three portfolio managers. He obtained the following data:

Manager	Portfolio Return	Portfolio Standard	Portfolio Beta
NAP Pension Fund	15.5%	14.5%	1.22
LASIF Fund	17.8%	17.2%	0.85
Madidad Insurance	19.0%	15.8%	1.05

The government Treasury Bill (T-Bill) rate is 10% and the market return is 15.8%.

Required:

1. Rank the managers using the Sharpe approach to measuring performance (6 marks)

2. Using Treynor approach, how would you rank the three portfolios? (6 marks)

3. Briefly explain why any differences have taken place in the ranking between Sharpe and Treynor measure approaches. (5 marks)

4. If the Treynor approach is used and the market return is 15.8%, which portfolio outperformed the market? Explain. (3 marks)