Question 4 (20 marks)

Hello! Please COMPLETE PARTS D & E ONLY

Use the following information for parts D to E.

The following table is the asset allocation of Alpine Equity Fund (Alpine) and its benchmark portfolio; and return rates of different sectors last year.

	Alpine		Benchmark
	Weight	Return	Weight	Return
Large Cap Stocks	30%	10%	25%	12%
Mid Cap Stocks	30%	15%	35%	14%
Small Cap Stocks	40%	20%	45%	18%

D. Calculate the excess return from asset allocation skill of Alpines fund manager.

(4 marks)

E. Calculate the excess return from security selection skill of Alpines fund manager. (4 marks)

Question 4 (20 marks) Use the following information for parts A to C. Average return rate Beta Standard Deviation 18.32% 1.4 34% Peony Equity Fund Maple Equity Fund 15.71% 1.3 28% Cedar Equity Fund 13.86% 1.2 24% S&P 500 8% ? 15% Risk-free rate is 2%. A. Calculate the Sharpe ratio of Maple Equity Fund. (3 marks) B. Calculate the M2 of Cedar Equity Fund. (5 marks) C. Calculate the Jensen measure of Peony Equity Fund. (4 marks) Use the following information for parts D to E. The following table is the asset allocation of Alpine Equity Fund (Alpine) and its benchmark portfolio; and return rates of different sectors last year. Alpine Benchmark Weight Return Weight Return Large Cap Stocks 30% 10% 25% 12% 30% 15% 35% 14% Mid Cap Stocks Small Cap Stocks 40% 20% 45% 18% D. Calculate the excess return from asset allocation skill of Alpine's fund manager. (4 marks) E. Calculate the excess return from security selection skill of Alpine's fund manager. (4 marks) *** End of Paper ***