You are thinking about investing in one of the two mutual funds, MassMutual and Vanguard. You have obtained the following information based on their performance over the last five years. Of course, you can always have the alternative option of investing in the S&P 500 index instead of all funds. The T-bill rate is averaged 5% in the last 5 years.

MassMutual VanguardS&P500 Index

Average Return30%25%15%

Beta21.81

Standard Deviation 28%18%13%

Calculate the following performance measure for MassMutual, Vanguard, and the Index:

Sharpe measure, Jensen measure, and Treynor measure. By each of the three measures, did MassMutual or Vanguard outperform the market index?

2) Calculate the M2 measure of MassMutual and Vanguard using the market index as a benchmark (i.e. set standard deviation to market level).

3) Calculate the T2 measure of MassMutual and Vanguard using the market index as a benchmark (i.e. set beta to market level).

4) Calculate the M2 measure of MassMutual using Vanguard as a benchmark (i.e. set standard deviation of MassMutual to Vanguard level).

5) Calculate the T2 measure of Vanguard using MassMutual as a benchmark (i.e. set beta of Vanguard to MassMutual level)

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Question 4 Goon Enterprise had the following balances on 1 February 2016: Land and building RM120,000; mortgage on premises RM100,000; office equipment RM15,000; cash at bank RM120,000 and cash on hand RM2,000. The following are the business transactions for the month of February 2016, which are to be recorded in the books of Goon Enterprise. Date Feb.4 Feb.5 Feb.6 Feb. 11 Feb. 12 Feb.16 Feb. 18 Feb. 19 Feb.20 Feb.22 Feb.23 Transactions Sold goods RM600 cash. Sold goods on credit to Lolo RM50,000. Paid sundry expenses RM140 in cash. Purchase goods on credit from Orak Enterprise worth RM10.000. Received 5% trade discount. Sold goods on credit to Suko Enterprise RM21,000, Suko Enterprise returned 10% of the goods sold to them. Received a credit note from Orak Enterprise for goods returned worth RM1,000 Owner took cash of RM300 for his own use. Paid Orak Enterprise in full settlement of the amount owing for goods purchased by cheque. Made cash purchases of RM20,000. Purchase office furniture RM50,000 from Ali Enteprise.Paid RM10,000 by cheque to Ali Enterprise as part of the settlement of the asset bought. The balance outstanding will be settled in 30 monthly instalments starting from March 2014. Question 4 Goon Enterprise had the following balances on 1 February 2016: Land and building RM120,000; mortgage on premises RM100,000; office equipment RM15,000; cash at bank RM120,000 and cash on hand RM2,000. The following are the business transactions for the month of February 2016, which are to be recorded in the books of Goon Enterprise. Date Feb.4 Feb.5 Feb.6 Feb. 11 Feb. 12 Feb.16 Feb. 18 Feb. 19 Feb.20 Feb.22 Feb.23 Transactions Sold goods RM600 cash. Sold goods on credit to Lolo RM50,000. Paid sundry expenses RM140 in cash. Purchase goods on credit from Orak Enterprise worth RM10.000. Received 5% trade discount. Sold goods on credit to Suko Enterprise RM21,000, Suko Enterprise returned 10% of the goods sold to them. Received a credit note from Orak Enterprise for goods returned worth RM1,000 Owner took cash of RM300 for his own use. Paid Orak Enterprise in full settlement of the amount owing for goods purchased by cheque. Made cash purchases of RM20,000. Purchase office furniture RM50,000 from Ali Enteprise.Paid RM10,000 by cheque to Ali Enterprise as part of the settlement of the asset bought. The balance outstanding will be settled in 30 monthly instalments starting from March 2014.

Answer rating: 100% (QA)

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