The Following Data Are Available Relating to the Performance of Seminole

question 72

Multiple Choice

The following data are available relating to the performance of Seminole Fund and the market portfolio: $$\begin{array} { l c c } && { \text { Market } } \\& \text { Monarch } & \text { Portfolio } \\\text { Average return } & 18 \% & 14 \% \\\text { Standard deviations of returns } &30 \% & 22 \% \\\text { Beta } & 1.4 & 1.00 \\\text { Residual standard deviation } &4.0\%&0.0\%\\\hline\end{array}$$ The risk-free return during the sample period was 6%. If you wanted to evaluate the Seminole Fund using the M² measure, what percent of the adjusted portfolio would need to be invested in T-Bills?

• A) -36% (borrow)
• B) 50%
• C) 8%
• D) 36%
• E) 27%