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%

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Definitions:

Reestablish

The act of restoring or bringing something back to its former position or condition.

Types

Various categories or sorts distinguished by a specific characteristic.

Bonds

Financial instruments representing a loan made by an investor to a borrower, typically corporate or governmental, which pays periodic interest payments and returns the principal at maturity.

William James

An American philosopher and psychologist, a leading thinker of the late 19th century known for his contributions to pragmatism and psychology.