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In the evaluation of bond portfolio performance, the analysis effect refers to


A) The difference in portfolio duration and index duration.
B) The extra return attributable to acquiring bonds that are temporarily mispriced relative to risk.
C) Short-run changes in the portfolio during a specific period.
D) The differential return from changing duration of the portfolio during a specific period.
E) None of the above

F) C) and E)
G) A) and E)

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Exhibit 25.6 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Given the following information evaluate the performance of Cloud Incorporated (CI) . Exhibit 25.6 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Given the following information evaluate the performance of Cloud Incorporated (CI) . -Refer to Exhibit 25.6. Calculate CI's selectivity. A) 0.1225 B) 0.1000 C) 0.0525 D) 0.0475 E) 0.0325 -Refer to Exhibit 25.6. Calculate CI's selectivity.


A) 0.1225
B) 0.1000
C) 0.0525
D) 0.0475
E) 0.0325

F) A) and C)
G) A) and D)

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Exhibit 25.12 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) An analyst is considering investing in funds A, B, C, and D. The market portfolio, M, is expected to be 11% next period and the risk-free rate of return is 3%. The market portfolio had a standard deviation over the past ten years of 0.20. The analyst gathered the following information on the four funds. Exhibit 25.12 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) An analyst is considering investing in funds A, B, C, and D. The market portfolio, M, is expected to be 11% next period and the risk-free rate of return is 3%. The market portfolio had a standard deviation over the past ten years of 0.20. The analyst gathered the following information on the four funds. -Refer to Exhibit 25.12. Compute the Jensen Measure for the C fund. A) 0.16% B) 1.80% C) 7.20% D) 9.00% E) 9.13% -Refer to Exhibit 25.12. Compute the Jensen Measure for the C fund.


A) 0.16%
B) 1.80%
C) 7.20%
D) 9.00%
E) 9.13%

F) A) and B)
G) B) and E)

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The most common manner of evaluating portfolio managers is a peer group comparison.

A) True
B) False

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Exhibit 25.3 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Consider the data presented below on three mutual funds and the market. Exhibit 25.3 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Consider the data presented below on three mutual funds and the market. -Refer to Exhibit 25.3. Compute the Jensen Measure for the BBB fund. A) 4.49 B) 2.74 C) 4.25 D) 5.55 E) 8.99 -Refer to Exhibit 25.3. Compute the Jensen Measure for the BBB fund.


A) 4.49
B) 2.74
C) 4.25
D) 5.55
E) 8.99

F) A) and B)
G) C) and D)

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In the evaluation of bond portfolio performance, the policy effect refers to


A) The difference in portfolio duration and index duration.
B) The extra return attributable to acquiring bonds that are temporarily mispriced relative to risk.
C) Short-run changes in the portfolio during a specific period.
D) The differential return from changing duration of the portfolio during a specific period.
E) None of the above.

F) B) and C)
G) B) and E)

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The measure of performance which divides the portfolio's risk premium by the portfolio's beta is the


A) Sharpe measure.
B) Jensen measure.
C) Fama measure.
D) Alternative components model (MCV) .
E) Treynor measure.

F) B) and E)
G) B) and C)

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The major requirements of a portfolio manager include the following, except


A) Follow the client's policy statement.
B) Completely diversify the portfolio to eliminate all unsystematic risk.
C) The ability to derive above-average risk adjusted returns.
D) Completely diversify the portfolio to eliminate all systematic risk.
E) None of the above (that is, all are requirements of a portfolio manager)

F) A) and B)
G) A) and C)

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The information ratio permits only relative assessments of performance for different portfolios in a style class.

A) True
B) False

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Investors want their portfolio managers to completely diversify their portfolio, that is, eliminate all systematic risk.

A) True
B) False

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Exhibit 25.5 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) The data presented below has been collected at this point in time. Exhibit 25.5 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) The data presented below has been collected at this point in time. -What is the Sharpe measure for the S&P 500 over the last ten years if the standard deviation was 8% and the return was 14%? A) 1.55 B) 1.69 C) 1.75 D) 1.99 E) 2.09 -What is the Sharpe measure for the S&P 500 over the last ten years if the standard deviation was 8% and the return was 14%?


A) 1.55
B) 1.69
C) 1.75
D) 1.99
E) 2.09

F) C) and E)
G) B) and C)

Correct Answer

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Exhibit 25.12 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) An analyst is considering investing in funds A, B, C, and D. The market portfolio, M, is expected to be 11% next period and the risk-free rate of return is 3%. The market portfolio had a standard deviation over the past ten years of 0.20. The analyst gathered the following information on the four funds. Exhibit 25.12 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) An analyst is considering investing in funds A, B, C, and D. The market portfolio, M, is expected to be 11% next period and the risk-free rate of return is 3%. The market portfolio had a standard deviation over the past ten years of 0.20. The analyst gathered the following information on the four funds. -Refer to Exhibit 25.12. Rank the four funds and market portfolio in order from highest to lowest based on their Sharpe measures. A) A, B, C, D, M B) B, C, M, D, A C) C, A, M, D, B D) D, A, B, M, C E) D, B, A, C, M -Refer to Exhibit 25.12. Rank the four funds and market portfolio in order from highest to lowest based on their Sharpe measures.


A) A, B, C, D, M
B) B, C, M, D, A
C) C, A, M, D, B
D) D, A, B, M, C
E) D, B, A, C, M

F) A) and E)
G) B) and C)

Correct Answer

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Exhibit 25.7 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Given the following information evaluate the performance of Tyler Incorporated (TI) . Exhibit 25.7 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Given the following information evaluate the performance of Tyler Incorporated (TI) . -Refer to Exhibit 25.7. Calculate TI's risk. A) 0.0113 B) 0.1200 C) 0.0670 D) 0.0530 E) 0.0696 -Refer to Exhibit 25.7. Calculate TI's risk.


A) 0.0113
B) 0.1200
C) 0.0670
D) 0.0530
E) 0.0696

F) C) and D)
G) A) and B)

Correct Answer

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Exhibit 25.5 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) The data presented below has been collected at this point in time. Exhibit 25.5 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) The data presented below has been collected at this point in time. -Refer to Exhibit 25.5. Compute the Treynor Measure for the ZZZ fund. A) 6.98 B) 2.35 C) 2.53 D) 3.86 E) 1.72 -Refer to Exhibit 25.5. Compute the Treynor Measure for the ZZZ fund.


A) 6.98
B) 2.35
C) 2.53
D) 3.86
E) 1.72

F) A) and B)
G) A) and C)

Correct Answer

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Exhibit 25.2 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) The portfolios identified below are being considered for investment. Assume that during the period under consideration Rf = .04. Exhibit 25.2 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) The portfolios identified below are being considered for investment. Assume that during the period under consideration R<sub>f</sub> = .04. -Refer to Exhibit 25.2. Using the Sharpe Measure, which portfolio performed best? A) W B) X C) Y D) Z E) Two portfolios are tied -Refer to Exhibit 25.2. Using the Sharpe Measure, which portfolio performed best?


A) W
B) X
C) Y
D) Z
E) Two portfolios are tied

F) A) and B)
G) A) and C)

Correct Answer

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In the Characteristic Selectivity (CS) performance measure,


A) Portfolio performance is measured by assessing the quality of services provided by money managers by looking at adjustments made to the content of their portfolios.
B) Portfolio performance is measured by examining both unsystematic and systematic risk.
C) Portfolio performance is measured by comparing the returns of each stock in the portfolio to the return of a benchmark portfolio.With the same aggregate investment characteristics as the security in question.
D) Portfolio performance is measured on the basis of return per unit of risk.
E) Portfolio performance is measured on the basis of historic average differential return per unit of historic variability of differential return.

F) A) and D)
G) A) and E)

Correct Answer

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When applying the Jensen's alpha measure the alpha level and significance can vary greatly depending on the specification of the return-generating model.

A) True
B) False

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The policy effect is a difference in bond portfolio performance from that of a benchmark index due to a difference in duration.

A) True
B) False

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The Sharpe measure examines the risk premium per unit of systematic risk.

A) True
B) False

Correct Answer

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Which of the following performance measures is the most rigorous risk-adjustment process separating systematic and unsystematic risk?


A) Treynor ratio
B) Sharpe ratio
C) Jensen's Alpha
D) Information ratio
E) None of the above

F) All of the above
G) D) and E)

Correct Answer

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