Following are the characteristics of market and three portfolios : 

 

Characteristics 

Market Portfolio 

Portfolio 1

Portfolio 2

Portfolio 3

P/E

16

12

22

17

P/B

2

1.5

3

1.8

Dividend Yield

3%

5%

1%

3.5%

Last 3 years average earning growth 

10%

8%

25%

11%

Industry type

N/M

FINANCE, Energy, Power Defensive 

CONSUMER, Retail ; Healthcare, IT

Finance, IT, Energy 

 

From the above, identify the equity investment style of the portfolio 1,  2 and 3 and comment on their investment philosophy and source of risk. In which spectrum of style, do you characterize yourself? 

Based on current dividend yields and expected capital gains, the expected rates of return on portfolios Aand B are 9.7% and 12.1%, respectively. The beta of A is .9, while that of B is 1.7. The T-bill rate is currently 5%, while the expected rate of return of the S&P 500 index is 10%. The standard deviation of portfolio A is 19% annually, while that of B is 40%, and that of the index is 29%.

If you currently hold a market index portfolio, what would be the alpha for Portfolios A and B?(Negative value should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 1 decimal place.)

If instead you could invest only in bills and one of these portfolios, calculate the sharpe measure for Portfolios A and B. (Round your answers to 2 decimal places.)

Issue

Years to Maturity

Par Value (in millions)

Bonds Included in Portfolio A

A

4.0

$120

B

4.5

$140

C

15.0

$160

D

15.5

$100

Bonds Included in Portfolio B

E

7.7

$200

F

12.0

$250

G

12.2

$90