Based on current dividend yields and expected capital gains, the expected rates of return on portfolios A and B are 13%

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Based On Current Dividend Yields And Expected Capital Gains The Expected Rates Of Return On Portfolios A And B Are 13 1 (47.26 KiB) Viewed 35 times

Based on current dividend yields and expected capital gains, the expected rates of return on portfolios A and B are 13% and 15% respectively. The beta of A is 0.8 while that of B is 1.3. The T-bill rate is currently 7% while the expected rate of return of the S&P500 index is at 14%. The standard deviation of portfolio A and B are 20% and 41%, and that of the index is 30%. a. Compare the performance of the two portfolios relative to the market using the four performance measures: Sharpe ratio, Treynor ratio, Jensen's Alpha and M?. Comment on the calculated results. b. Would you choose to add A or B to your holdings if you currently hold a market-index portfolio? Justify your decision. c. Which portfolio would you choose if instead you could invest only in Treasury bills and one of these portfolios? Explain your answer. c. Could a portfolio show a higher Sharpe ratio but a lower Mº measure at the same time? Explain your answer.