You Want to Evaluate Three Mutual Funds Using the Information

question 69

Multiple Choice

You want to evaluate three mutual funds using the information ratio measure for performance evaluation.The risk-free return during the sample period is 6%,and the average return on the market portfolio is 19%.The average returns,residual standard deviations,and betas for the three funds are given below. $$\begin{array} { | l | l | l | l | } \hline & \text { Average Return } & \text { Residual Standard Deviation } & \text { Beta } \\\hline \text { Fund A } & 20 \% & 4.00 \% & 0.8 \\\hline \text { Fund B } & 21 \% & 1.25 \% & 1.0 \\\hline \text { Fund C } & 23 \% & 1.20 \% & 1.2 \\\hline\end{array}$$ The fund with the highest information ratio 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:

Federal Exemptions

Legal provisions that allow individuals or entities to exclude certain assets or incomes from taxation under federal law.

Chapter 7

A provision of the Bankruptcy Code that provides for the liquidation of a debtor's assets to pay off creditors.

Bankruptcy Relief

Legal processes and protections afforded to individuals or corporations that are unable to repay their debts, aimed at providing a fresh start or reorganization.

Federal Exemptions

Protections and privileges granted under federal law, often in bankruptcy, that allow individuals to retain certain assets from creditors.