Why is comparing a portfolio's return to the return on a broad market index generally inadequate? Explain.
Answer to relevant QuestionsBriefly describe each of the following return measures for assessing portfolio performance and explain how they are used. a. Sharpe's measure b. Treynor's measure c. Jensen's measure (Jensen's alpha) Briefly describe each of the following plans and differentiate among them. a. Dollar-cost averaging b. Constant-dollar plan c. Constant-ratio plan d. Variable-ratio plan Why is it important to continuously manage and control your portfolio? Your portfolio returned 13% last year, with a beta equal to 1.5. The market return was 10%, and the risk-free rate 6%. Did you earn more or less than the required rate of return on your portfolio? (Use Jensen’s measure.) Jill Clark invested $25,000 in the bonds of Industrial Aromatics, Inc. She held them for 13 months, at the end of which she sold them for $26,746. During the period of ownership she received $2,000 interest. Calculate the ...
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