Portfolio managers Paul Martin and Kevin Krueger each manage $1,000,000 funds.Paul Martin has perfect foresight and the call option value of his perfect foresight is $150,000.Kevin Krueger is an imperfect forecaster and correctly predicts 50% of all bull markets and 70% of all bear markets.The correct measure of timing ability for Kevin Krueger is __________.
A) 20%
B) 60%
C) 75%
D) 120%

Question

Quizplus · Accepted Answer

The timing ability is calculated as the average of the correct predictions for bull and bear markets: (50% + 70%) / 2 = 60%.

Portfolio Managers Paul Martin and Kevin Krueger Each Manage $1,000,000