You Want to Evaluate Three Mutual Funds Using the Sharpe

question 75

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 5%.The average returns,standard deviations and betas for the three funds are given below,as is the data for the S&P 500 index. $$\begin{array} { | l | l | l | l | } \hline & \text { Average Return } & \text { Standard. Deviation } & \text { Beta } \\\hline \text { Fund A } & 23 \% & 30 \% & 1.3 \\\hline \text { Fund B } & 20 \% & 19 \% & 1.2 \\\hline \text { Fund C } & 19 \% & 17 \% & 1.1 \\\hline \text { S\&P 500 } & 18 \% & 15 \% & 1.0 \\\hline\end{array}$$ The investment with the highest Sharpe measure is __________.

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

---

Definitions:

Spot Exchange Rate

The spot exchange rate is the current price at which one currency can be exchanged for another for immediate delivery.

Futures Price

Futures Price is the agreed-upon price for the purchase or sale of a particular asset at a future date, determined in the futures market.

Stock Index Futures

Futures contracts to buy or sell a specific stock index at a predetermined price on a specified future date, used for hedging or speculating on the direction of the stock market.

Multiplier

A concept in economics referring to the factor by which a change in investment, government spending, or other economic activity results in a larger change in the gross domestic product (GDP).