Investment Calculation/Problems Solved
Sheet2
| What is the Sharpe ratio, Treynor ratio, and Jensen’s alpha for each portfolio? (Negative values should be indicated by a minus sign. Leave no cells blank – be certain to enter “0” wherever required. Do not round intermediate calculations. Round your Sharpe ratio answers and Treynor ratio answers to 5 decimal places and Jensen’s alpha answers to 2 decimal places. Omit the “%” sign in your response.) | |||||||||
| Portfolio | RP | σP | βP | Portfolio | Sharpe Ratio | Treynor Ratio | Jensen’s Alpha | Cannot figure out the Treynor Jensen’s or Market | |
| X | 16.5 | % | 37 | % | 1.40 | X | % | ||
| Y | 15.5 | 32 | 1.15 | Y | % | ||||
| Z | 7.4 | 22 | .70 | Z | % | ||||
| Market | 11.8 | 27 | 1.00 | Market | % | ||||
| Risk-free | 5.2 | 0 | 0 |
Sheet3
| A stock has an annual return of 13 percent and a standard deviation of 61 percent. What is the smallest expected loss over the next year with a probability of 5 percent? (Negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the “%” sign in your response.) | |
| Smallest expected loss | % |
Sheet4
| A stock has an annual return of 10.4 percent and a standard deviation of 41 percent. What is the smallest expected gain over the next year with a probability of 1 percent? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the “%” sign in your response.) | |
| Smallest expected gain | % |
Sheet5
| Problem 13-19 | ||||||
| Consider the following information for a mutual fund, the market index, and the risk-free rate. You also know that the return correlation between the fund and the market is .97. | ||||||
| Year | Fund | Market | Risk-Free | |||
| 2008 | –20.60 | % | –39.5 | % | 1 | % |
| 2009 | 25.1 | 21 | 3 | |||
| 2010 | 13.9 | 13.9 | 2 | |||
| 2011 | 7.6 | 8.8 | 4 | |||
| 2012 | –2.10 | –5.2 | 2 | |||
| What are the Sharpe and Treynor ratios for the fund? (Do not round intermediate calculations. Round your answers to 4 decimal places.) | ||||||
| Sharpe ratio | Need answer | |||||
| Treynor ratio | Need answer |
Sheet6
| Problem 13-20 | ||||||
| Consider the following information for a mutual fund, the market index, and the risk-free rate. You also know that the return correlation between the fund and the market is .95. | ||||||
| Year | Fund | Market | Risk-Free | |||
| 2008 | –19.40 | % | –37.5 | % | 1 | % |
| 2009 | 25.1 | 20.8 | 4 | |||
| 2010 | 13.7 | 13.3 | 2 | |||
| 2011 | 7.2 | 8.4 | 6 | |||
| 2012 | –1.98 | –4.2 | 2 | |||
| Calculate Jensen’s alpha for the fund, as well as its information ratio. (Do not round intermediate calculations. Round your Jensen’s alpha answer to 2 decimal places and Information ratio answer to 4 decimal places. Omit the “%” sign in your response.) | ||||||
| Jensen’s alpha | % | Need Answer | ||||
| Information ratio | Need Answer |
Sheet7
| Problem 17-3 | ||
| You are given the following information for Smashville, Inc. | ||
| Cost of goods sold: | $ | 234,000 |
| Investment income: | $ | 2,600 |
| Net sales: | $ | 397,000 |
| Operating expense: | $ | 92,000 |
| Interest expense: | $ | 7,400 |
| Dividends: | $ | 12,000 |
| Tax rate: | 40 | % |
| Current liabilities: | $ | 20,000 |
| Cash: | $ | 21,000 |
| Long-term debt: | $ | 22,000 |
| Other assets: | $ | 42,000 |
| Fixed assets: | $ | 131,000 |
| Other liabilities: | $ | 5,000 |
| Investments: | $ | 46,000 |
| Operating assets: | $ | 47,000 |
| Calculate the gross margin, the operating margin, return on assets, and return on equity. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Omit the “%” sign in your response.) | ||
| Gross margin | % | |
| Operating margin | % | |
| Return on assets | % | Cannot figure this one out? |
| Return on equity | % | Cannot figure this one out? |
Sheet8
| Problem 17-6 | |||||
| The most recent financial statements for Bradley, Inc., are shown here (assuming no income taxes): | |||||
| Income Statement | |||||
| Sales | $ | 6,400 | |||
| Costs | (4,480 | ) | |||
| Net income | $ | 1,920 | |||
| Balance Sheet | |||||
| Assets | $ | 19,200 | Debt | $ | 9,900 |
| Equity | 9,300 | ||||
| Total | $ | 19,200 | Total | $ | 19,200 |
| Assets and costs are proportional to sales. Debt and equity are not. No dividends are paid. Next year’s sales are projected to be $7,808. What is the external financing needed? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to the nearest whole dollar. Omit the “$” sign in your response.) | |||||
| EFN | $ | ||||
| Cannot figure out EFN? |
Sheet9
| Problem 17-11 | |||||
| The most recent financial statements for Martin, Inc., are shown here: | |||||
| Income Statement | |||||
| Sales | $ | 29,500 | |||
| Costs | -18,000 | ||||
| Taxable income | $ | 11,500 | |||
| Taxes (34%) | -3,910 | ||||
| Net income | $ | 7,590 | |||
| Balance Sheet | |||||
| Assets | $ | 82,600 | Debt | $ | 30,000 |
| Equity | 52,600 | ||||
| Total | $ | 82,600 | Total | $82,600 | |
| Assets and costs are proportional to sales. Debt and equity are not. A dividend of $1,165 was paid, and Martin wishes to maintain a constant payout ratio. Next year’s sales are projected to be $33,630. What is the external financing needed? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the “$” sign in your response.) | |||||
| EFN | $ | ||||
| Cannot figure out EFN? |
Sheet10
| Problem 17-14 | |||
| Amounts are in thousands of dollars (except number of shares and price per share): | |||
| Kiwi Fruit Company Balance Sheet | |||
| Cash and equivalents | $ | 480 | |
| Operating assets | 760 | ||
| Property, plant, and equipment | 3,000 | ||
| Other assets | 165 | ||
| Total assets | $ | 4,405 | |
| Current liabilities | $ | 980 | |
| Long-term debt | 1,375 | ||
| Other liabilities | 175 | ||
| Total liabilities | $ | 2,530 | |
| Paid in capital | $ | 395 | |
| Retained earnings | 1,480 | ||
| Total equity | $ | 1,875 | |
| Total liabilities and equity | $ | 4,405 | |
| Kiwi Fruit Company Income Statement | |||
| Net sales | $ | 6,700 | |
| Cost of goods sold | (4,900 | ) | |
| Gross profit | $ | 1,800 | |
| Operating expense | (530 | ) | |
| Operating income | $ | 1,270 | |
| Other income | 160 | ||
| Net interest expense | (200 | ) | |
| Pretax income | $ | 1,230 | |
| Income tax | (250 | ) | |
| Net income | $ | 980 | |
| Earnings per share | $ | 1 | |
| Shares outstanding | 980,000 | ||
| Recent price | $ | 43.5 | |
| Kiwi Fruit Company Cash Flow Statement | |||
| Net income | $ | 980 | |
| Depreciation and amortization | 220 | ||
| Increase in operating assets | (100 | ) | |
| Decrease in current liabilities | (112 | ) | |
| Operating cash flow | $ | 988 | |
| Net (purchase) sale of property | $ | 200 | |
| Increase in other assets | (73 | ) | |
| Investing cash flow | $ | 127 | |
| Net (redemption) issuance of LTD | $ | (168 | ) |
| Dividends paid | (182 | ) | |
| Financing cash flow | $ | (350 | ) |
| Net cash increase | $ | 765 | |
| Calculate the price-book, price-earnings, and price-cash flow ratios for Kiwi Fruit. (Do not round intermediate calculations. Round your answers to 2 decimal places.) | |||
| Price-book ratio | Need Answer | ||
| Price-earnings ratio | Need Answer | ||
| Price-cash flow ratio | Need Answer |
0.10
0.10
0.32
0.32
0.30540
0.30540
17.88
17.88
41.06
41.06
0
0
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