What is a risk-adjusted return?
Answer to relevant QuestionsWhat are the differences between financial and real assets? Assume the real rate of return in the economy is 2.5 percent, the expected rate of inflation is 5 percent, and the risk premium is 5.8 percent. Compute the risk-free rate (Formula 1-3) and required rate of return. What generally determines how firms are listed in a tombstone advertisement? What does a high R2 (correlation) between a fund’s excess returns and the market’s excess returns indicate about the fund manager’s ability to effectively diversify? Assume a second firm that evaluates portfolios uses the Treynor approach to measuring performance. The firm is also evaluating the three portfolios in problem 1. The portfolio betas are as follows: a. Using the Treynor ...
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