A portfolio P and its benchmark portfolio B invest in equities and bonds only. Consider the...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
A portfolio P and its benchmark portfolio B invest in equities and bonds only. Consider the following data for two consecutive months and show that neither arithmetic contributions nor arithmetic outperformances do add up to arithmetic outperformance: month 1 P B month 2 P B wr T T equities 60 12 50 8 ? 8 ? 9 bonds 40 4 50 3 ? 2? 3 w, r denoting weights and returns in % W T a) calculate the weights for month 2 given return and weight data for month 1. b) calculate the performance of P and B for month 1, month 2 and the 2-month period. c) calculate the relative contributions of equities and bonds for each month according to the BF-model. Note: Present your final results in table form (rows: month and asset class; columns: allocation, selection and interaction) d) show that the relative contributions do not add up to the 2-month arithmetic outperformance. A portfolio P and its benchmark portfolio B invest in equities and bonds only. Consider the following data for two consecutive months and show that neither arithmetic contributions nor arithmetic outperformances do add up to arithmetic outperformance: month 1 P B month 2 P B wr T T equities 60 12 50 8 ? 8 ? 9 bonds 40 4 50 3 ? 2? 3 w, r denoting weights and returns in % W T a) calculate the weights for month 2 given return and weight data for month 1. b) calculate the performance of P and B for month 1, month 2 and the 2-month period. c) calculate the relative contributions of equities and bonds for each month according to the BF-model. Note: Present your final results in table form (rows: month and asset class; columns: allocation, selection and interaction) d) show that the relative contributions do not add up to the 2-month arithmetic outperformance.
Expert Answer:
Answer rating: 100% (QA)
a calculate the weights for month 2 given return and weight data for month 1 ANS WER Equ ities P Month 2 60 12 50 8 8 9 63 33 B Month 2 50 8 50 3 8 9 36 67 B onds P Month 2 40 4 50 3 2 3 46 67 B Month ... View the full answer
Related Book For
Posted Date:
Students also viewed these accounting questions
-
Consider the following data for two of Hawk's production departments, Shampoo and Soap, and two of its support departments, Maintenance and Information Systems. Required: Allocate the support...
-
Consider the following data for a manufacturer: Requirement 1. Compute cost of goods manufactured and cost of goodssold. End of Year Beginning of Year Direct materials inventory Work in process...
-
Consider the following data for three different companies: The patterns of cash flows for these firms differ. One firm is a growth firm that is expanding rapidly, another firm is in danger of...
-
The exact perimeter P of a square is 50 feet. What measured lengths are possible for the side S of the square to have relative error in the perimeter that is less than or equal to 0.04 (or 4%)?
-
Was it appropriate for Ernst & Young to decide not to rely on AA Capitals internal controls during the 2004 audits? Under what circumstances can auditors choose not to rely on a clients internal...
-
The Pacific Company is a multidivisional company. Its managers have full responsibility for profits and complete autonomy to accept or reject transfers from other divisions. Division A produces a...
-
Increasingly, we are seeing email used in cases involving defendants located in foreign countries. Plaintiffs filed suit against four Defendants: Qingdao Sunflare New Energy Co., Skone Lighting Co.,...
-
Christi, Inc., is using a costs-of-quality approach to evaluate design engineering efforts for a new skateboard. Christis senior managers expect the engineering work to reduce appraisal, internal...
-
Show that the function is a solution to y(x) = = Ce + Czex d y dy 2y = 0 dx dx for any choice of the constants C1 and C2. Then, determine C1 and C2 so that the initial conditions y(0) = 2 and dxx (0)...
-
Atlantic Airlines issued $100 million in bonds in 2008. Because of the firm's low credit rating (B3), the bonds were considered to be junk bonds. At the time of issue, the 20 year bonds were paying a...
-
The chief executive officer earns $22,000 per month. As of May 31, her gross pay was $110,000. The tax rate for Social Security is 6.2% of the first $118,500 earned each calendar year and the FICA...
-
What information about the firm is provided by liquidity measures?
-
A company recently announced an increase in its net income, yet its net cash flow declined relative to last year. Explain.
-
Define days of sales outstanding, days of sales in inventory, and days of payables outstanding.
-
What is the upside of debt financing? What is the downside?
-
What is the most commonly used method for incorporating risk into the capital-budgeting decision? How is this technique related to Principle 3: Risk Requires a Reward?
-
Compute the price of Pabon. It has 2 m shares outstanding and $80 of book value of equity. Pabon expects to sell $20m worth of sales and have EAT of $5m and keep 40% of its profit. Furthermore, it...
-
[a] Two foam blocks, each with a charge of 19 micro coulombs (1 C = 10-6 C), are both held in place 19 cm apart in the east-west direction. A foam ball with a charge 49 C is placed 55 cm north of the...
-
In fiscal 2007, Circuit City invested $242 million in capital expenditures, including $108 million related to store relocations, remodeling, and new store construction. Assume that these projects...
-
Lee Corporation is considering a new project requiring a $300,000 investment in an asset having no salvage value . The project would produce $125,000 of pretax income before depreciation at the end...
-
Kendra, Cogley, and Mei share income and loss in a 3:2:1 ratio. The partners have decided to liquidate their partnership. On the day of liquidation their balance sheet appears as follows. Required...
-
Perhaps the most famous case illustrating the enormous cost of winning back lost customers is that of the Tylenol Murders. Seven people in the Chicago area died suddenly after taking Tylenol...
-
Describe the concept of MBWA.
-
Give a brief rationale for empowerment.
Study smarter with the SolutionInn App