You Want to Evaluate Three Mutual Funds Using the Treynor

question 26

Multiple Choice

You want to evaluate three mutual funds using the Treynor 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,in addition to information regarding the S&P 500 index. $$\begin{array} { | l | l | l | l | } \hline & \text { Average Return } & \text { Standard. Deviation } & \text { Beta } \\\hline \text { Fund A } & 13 \% & 10 \% & 0.5 \\\hline \text { Fund B } & 19 \% & 20 \% & 1.0 \\\hline \text { Fund C } & 25 \% & 30 \% & 1.5 \\\hline \text { S\&P 500 } & 18 \% & 16 \% & 1.0 \\\hline\end{array}$$ The fund with the highest Treynor 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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Definitions:

Observational Learning

Learning that occurs through observing the behavior of others and the outcomes of those behaviors, without direct experience.

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The process by which individuals learn to conform to societal expectations and norms regarding gender roles and behaviors.

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The area of study focusing on how people process, store, and apply information about other people and social situations.

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Psychological strategies used by the unconscious mind to protect itself from anxiety arising from unacceptable thoughts or feelings.