You Want to Evaluate Three Mutual Funds Using the Appraisal

question 31

Multiple Choice

You want to evaluate three mutual funds using the appraisal 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. $$\begin{array} { l c c c } & \text { Average Return } & \text { Residual Standard Deviation } & \text { Beta } \\\hline \text { Fund A } & 20 \% & 4.00 \% & 0.8 \\\text { Fund B } & 21 \% & 1.25 \% & 1.0 \\\text { Fund C } & 23 \% & 1.20 \% & 1.2\end{array}$$
The fund with the highest appraisal ratio measure is _________.

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

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