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Question 3 You have been asked to analyze the performance of a equity portfolio which...

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Question 3 You have been asked to analyze the performance of a equity portfolio which is measured against a leading equity index benchmark. A summary of the statistics provided for the portfolio are shown in the table below. The risk-free rate is 0.5%. Equity Fund Benchmark Return %* 13.2 11.8 Volatility % 12.8 9.0 Tracking error % 6.8 Beta 1.0 a) Calculate Jensen's alpha and interpret the tracking error of the portfolio. (4 marks) b) Calculate the Sharpe ratio of the portfolio and comment on whether you think this is a good ratio. (4 marks) c) Calculate the Information ratio of the portfolio and comment on whether you think this is a good ratio. (4 marks) d) The following portfolios are being considered for investment. During the period under consideration, RFR = 0.08. Portfolio Return Beta W 0.10 0.7 0.02 0.18 1.0 0.06 Y 0.22 1.6 0.09 Z. 0.15 1.2 0.04 Market 0.12 1.0 0.03 i. Calculate the Treynor measure for each portfolio and the market portfolio. ii. Rank the portfolios according to your answer in (i) and determine which portfolio performed the best Tr

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