The Following Data Are Available Relating to the Performance of Long

question 70

Multiple Choice

The following data are available relating to the performance of Long Horn Stock Fund and the market portfolio: $$\begin{array} { | l | l | l | } \hline & \text { Long Horn } & \text { Market Portfolio } \\\hline \text { Average Return } & 19 \% & 12 \% \\\hline \text { Standard Deviation of Returns } & 35 \% & 15 \% \\\hline \text { Beta } & 1.5 & 1.0 \\\hline \text { Residual standard deviation } & 3.0 \% & 0.0 \% \\\hline\end{array}$$ The risk-free return during the sample period was 6%.
-Calculate the information ratio for Long Horn Stock Fund.

• A)1.33
• B)4.00
• C)8.67
• D)31.43
• E)37.14

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Definitions:

Indirect Method

A cash flow statement preparation approach that adjusts net income for non-cash transactions and changes in working capital to calculate operating cash flow.

Comparative Balance Sheet

A financial statement that presents a company's assets, liabilities, and equity at two or more points in time, allowing for comparison and trend analysis.

Operating Activities

Operating activities include the primary revenue-generating activities of a business, as well as other activities that are not investing or financing activities, reflecting the company's core operations cash flow.

Comparative Balance Sheet

A financial statement that provides a snapshot of a company's assets, liabilities, and equity at two or more points in time for comparison.