Answers to problems

[Adam Gehr]

4)a) Alpha for A is: 0.2
     Alpha for B is: -1.0
     As part of a larger portfolio you would prefer A.
  b) Sharpe ratio for A is: 0.5
     Sharpe ratio for B is: 0.26
     A would again be preferred even if it's just held by itself with the
risk-free security.

9) The manager's alpha is zero.

10 a) Alpha for A is 3%
      Alpha for B is 4.5%
      Treynor ratio for A is 12
      Treynor ratio for B is 12
      Both have positive Alphas and outperform the market.