Performance Metrics Problem 2023 Business Finance

2023 Complete Problem 22 in the Questions and Problems section of Chapter 13 shown

Complete Problem 22 in the Questions and Problems section of Chapter 13 (shown below). When you pick the best choice for your portfolio, defend your decision in a 100- to 200-word essay.

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

22. Dollar-Weighted Average Return (LO3, CFA6) Suppose that an investor opens an account by investing $1,000. At the beginning of each of the next four years, he deposits an additional $1,000 each year, and he then liquidates the account at the end of the total five-year period. Suppose that the yearly returns in this account, beginning in year 1, are as follows: 12 percent, 5 percent, 8 percent, ﰇ7 percent, and ﰇ14 percent. Calculate the arithmetic and geometric average returns for this investment, and determine what the investor’s actual dollar-weighted average return was for this five-year period. Why is the dollar-weighted average return higher or lower than the geometric average return?

(BUS 405, p. 64)

*BUS 405*. McGraw-Hill Create. Retrieved from <vbk:9781121253254#page(64)>.

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