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### (solution)- Performance Metrics

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The Question

When you pick the best choice for your portfolio, defend your decision in a one-page essay following APA guidelines.

You have been given the following return information for two mutual funds (Papa and Mama), the market index, and the risk-free rate.

 Year Papa Fund Mama Fund Market Risk-Free 2008 -12.6% -22.6 -24.5% 1% 2009 25.4 18.5 19.5 3 2010 8.5 9.2 9.4 2 2011 15.5 8.5 7.6 4 2012 2.6 -1.2 -2.2 2

Calculate the Sharpe ratio, Treynor ratio, Jensen?s alpha, information ratio, and R-squared for both funds and determine which is the best choice for your portfolio.

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#### Solution details

Solution #000479105356

## Performance Metrics

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Performance xxxxxxx

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When you xxxx xxx best xxxxxx xxx xxxx xxxxxxxxxx xxxxxx your decision xx a?one-page xxxxx xxxxxxxxx APA guidelines.

xxx xxxx been given the xxxxxxxxx return information for two mutual xxxxx (Papa xxx Mama), xxx xxxxxx index, and the risk-free rate.

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 xxxx xxxx xxxx Mama Fund Market xxxxxxxxx xxxx xxxxxx -22.6% -24.5% 1% 2009 25.4% xxxxx 19.5% 3% 2010 8.5% xxxx xxxx 2% xxxx xxxxx xxxx 7.6% 4% 2012 2.6% -1.2% -2.2% 2% Avg xxxxx 2.46% 1.96% 2.40% Standard Deviation 14.25% 15.66% xxxxxx Tracking xxxxx xxxxx 1.13% xxxxx xxxxx xxxx Beta xxxxx .9342 xxxx Ratio 1.2478 xxxxxx xxxxxxxxxxx xxxxx .9996 xxxx xxxx xxxx Excess xxxx xxxx xxxxxx Market Excess xxxx Fund Excess Diff Mama xxxx xxxxxx Diff 2008 -13.60% -23.60% xxxxxxx xxxxxx xxxxx xxxx 22.40% 15.50% xxxxxx xxxxx -1.00% xxxx xxxxx 7.20% 7.40% xxxxxx -0.20% xxxx xxxxxx xxxxx xxxxx 7.90% xxxxx 2012 xxxxx -3.20% -4.20% xxxxx 1.00%

xxxxxxxxx the xxxxxx xxxxxx

PF=(7.8-2.4) divided xx 14.25=.384561

MF+(2.48-2.4) xxxxxxx xx xxxxxxxxxxxxx

Treynor xxxxx

xxxxxxxxxxx xxxxxxx by 80.99 (Beta)=.06766

(2.48-2.40) xxxxxxx xx 93.42=.085634

xxxxxx?x alpha:

xxxxxxxxxxxxxxx x (1.96-2.40)

7.88-2.40- xxxxxxxxxxxxxxxxx

2.48-2.40-.9342(2.48-2.40)

xxxxxxxxx -.4119768=.4919768

xxxxxxxxxxx xxxxx x

5.84/4.68=1.24786

.49/1.13=.43362

xxxxx divided xx xxxxxxxx xxxxx

R-squared for both funds xxx

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more text follows

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This paper was answered on 19-Jul-2017

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Jul 19, 2017

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#### TUTORIAL SOLUTIONS

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