You Want to Evaluate Three Mutual Funds Using the Jensen

question 41

Multiple Choice

You want to evaluate three mutual funds using the Jensen measure for performance evaluation.The risk-free return during the sample period is 6%,and the average return on the market portfolio is 18%.The average returns,standard deviations,and betas for the three funds are given below. $$\begin{array} { | l | l | l | l | } \hline & \text { Average Return } & \text { Standard. Deviation } & \text { Beta } \\\hline \text { Fund } \mathrm { A } & 17.6 \% & 10 ^ { \circ } \% & 1.2 \\\hline \text { Fund B } & 17.5 ^ { \circ } \% & 20 ^ { \circ } \% & 1.0 \\\hline \text { Fund C } & 17.4 ^ { \circ } \% & 30 ^ { \circ } \% & 0.8 \\\hline\end{array}$$ The fund with the highest Jensen 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:

Bonds

Connections or ties that hold people together, such as family bonds, or financial instruments issued by corporations or governments.

Optimum

The most favorable conditions or level for growth, development, or efficiency.

Stress

A psychological and physical response to demands or challenges which can arise from various environmental or internal factors.

Strength-Based Perspective

An approach in various professional fields that focuses on an individual's strengths and resources to overcome challenges and achieve goals.