Tiêu đề Level III V5 LM03 Essay Quiz Solution.pdf ✅

Level III Portfolio Performance Evaluation Essay Quiz Solution Copyright © IFT. All rights reserved www.ift.world Page 1 Topic: Portfolio Management – Performance Evaluation Zippa Wealth Management Case Scenario. Minutes: 18 Part A Sharpe Ratio: SA = (Return for Manager A – Risk free rate) / Standard DeviationA = (18 – 3) / 20 = 0.75 SB = (Return for Manager B – Risk free rate) / Standard DeviationB = (20 – 3) / 26.5 = 0.64 Treynor Measure: TA = (Return for Manager A – Risk free rate) / BetaA = (18 – 3) / 0.90 = 0.167 TB = (Return for Manager B – Risk free rate) / BetaB = (20 – 3) / 1.20 = 0.142 Sortino Ratio: SR(A) = (Return of Manager A – minimum acceptable return) / downside risk or target semi- standard deviation (A) SR(A) = (18 – 3) / 10.20 = 1.47 SR(B) = (Return of Manager B – minimum acceptable return) / downside risk or target semi- standard deviation (B) SR(B) = (20 – 3) / 12.70 = 1.34 Appraisal Ratio: Appraisal ratio = Jensen’s alpha/standard deviation of ε Where Jensen’s alpha = return of portfolio – [risk-free rate + beta x (return on the benchmark market index- risk-free rate] Variance of Non-systematic risk = Variance of total risk – beta square x variance of benchmark (market index) risk. For (Manager A): Jensen’s alpha αp = 18.0% – [3.0% + 0.90(16.50% – 3.0%)] = 2.85% Non-systematic risk is: σ2 ε = 0.202 – 0.902 (0.222 ) = 0.000796. AR̂ = 0.0285 √0.000796 = 1.0102 For (Manager B): Jensen’s alpha αp = 20.0% – [3.0% + 1.20(16.50% – 3.0%)] = 0.80% Non-systematic risk is: σ2 ε = 0.2652 – 1.202 (0.222 ) = 0.000529. AR̂ = 0.008/√0.000529=0.3478