You Want to Evaluate Three Mutual Funds Using the Information

question 60

Multiple Choice

You want to evaluate three mutual funds using the information ratio measure for performance evaluation. The risk-free return during the sample period is 6%, and the average return on the market portfolio is 19%. The average returns, residual standard deviations, and betas for the three funds are given below. $\begin{array}{cc} &\text {Average ReturnResidual } &\text { Standard Deviation }&\text { Beta }\\ \text { Fund A } &20\%&4.00\%&0.8\\ \text {Fund B } &21\%&1.025\%&1.0\\ \text { Fund C} &23\%&1.20\%&1.2\\\end{array}$
The fund with the highest information ratio measure is

• A) Fund A.
• B) Fund B.
• C) Fund C.
• D) Funds A and B (tied for highest).
• E) Funds A and C (tied for highest).

Know the adjustments required to convert net income to net cash provided by operating activities.

Identify and categorize non-cash transactions and their impact on the statement of cash flows.

Calculate net cash provided by operating, investing, and financing activities.

Recognize the importance of free cash flow and its computation.

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Definitions:

Addiction

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