FIN 402 Week 2 DQ 1
97.000 at the beginning of the year and ended the calendar year at 96.375 %. Mutual fund. The Stalchecks hold 500 shares in the Holt Fund, a balanced, no-load mutual fund. The dividend distributions on the fund during the year consisted of $ 0.60 in investment income and $ 0.50 in capital gains. The fund’ s NAV at the beginning of the calendar year was $ 19.45, and it ended the year at $ 20.02. Options. The Stalchecks own 100 options contracts on the stock of a company they follow. The value of these contracts totaled $ 26,000 at the beginning of the calendar year. At year-end the total value of the options contracts was $ 29,000. Questions a. Calculate the holding period return on a before-tax basis for each of these four investments. b. Assuming that the Stalchecks’ s ordinary income is currently being taxed at a combined( federal and state) tax rate of 38 % and that they would pay a 15 % capital gains tax on dividends and capital gains for holding periods longer than 12 months, determine the after-tax HPR for each of their four investments. c. Recognizing that all gains on the Stalchecks’ s investments were unrealized, calculate the before-tax portfolio HPR for their four-investment portfolio during the past calendar year. Evaluate this return relative to its current income and capital gain components. d. Use the HPR calculated in question c to compute Jensen’ s measure( Jensen’ s alpha). Use that measure to analyze the performance of the Stalchecks’ s portfolio on a risk-adjusted, market-adjusted basis. Comment on your finding. Is it reasonable to use Jensen’ s measure to evaluate a fourinvestment portfolio? Why or why not? On the basis of your analysis in questions a, c, and d, what, if any, recommendations might you offer the Stalchecks relative to the revision of their portfolio? Explain your recommendations. ==============================================
FIN 402 Week 2 DQ 1