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You Want to Evaluate Three Mutual Funds Using the Treynor

question 2

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. $\begin{array} { c c r r } & \begin{array} { c } \text { Average } \\\text { Return }\end{array} & \begin{array} { r } \text { Standard } \\\text { Deviation }\end{array} & \text { Beta } \\\hline \text { Fund A } & 13 \% & 10 \% & 0.5 \\\text { Fund B } & 19 \% & 20 \% & 1.0 \\\text { Fund C } & 25 \% & 30 \% & 1.5 \\\text { S\&P 500 } & 18 \% & 16 \% & 1.0\end{array}$ The fund with the highest Treynor measure is

Definitions:

Adequate Consideration

Consideration in a contract that is fairly equitable and of sufficient value, considering the facts of the case and the circumstances surrounding the agreement.

Forbearance

The temporary postponement of mortgage payments or enforcement of a policy, often to prevent foreclosure.

Good Faith Belief

An underlying assumption or conviction by an individual that their actions or decisions are justified, fair, and honest, based on the information available to them.

Moral Obligation

A sense of duty or ethical responsibility not enforceable by law but considered binding in personal or social contexts.