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