You Want to Evaluate Three Mutual Funds Using the Sharpe

question 1

Multiple Choice

You want to evaluate three mutual funds using the Sharpe measure for performance evaluation.The risk-free return during the sample period is 6%.The average returns,standard deviations and betas for the three funds are given below,as is the data for the S&P 500 index. $$\begin{array}{l}\begin{array} { l l l l } \text { Average Return } & \text { Standard Deviation }&\text { Beta } \\\text { Fund A } &24 \% & 30 \% & 1.5\\\text { Fund B } &12\%&10\%&0.5\\\text { Fund C } &22\%&20\%&1.0\\\text { S\&P 500 } &18\% &16\% &1.0\end{array}\end{array}$$
The fund with the highest Sharpe 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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