You Want to Evaluate Three Mutual Funds Using the Sharpe

question 30

Multiple Choice

You want to evaluate three mutual funds using the Sharpe 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,as is the data for the S&P 500 index.
$\begin{array}{|l|c|c|c|}\hline & \text { Average Return } & \text { Standard Deviation } & \text { Beat } \\\hline \text { Fund A } & 24 \% & 30 \% & 1.5 \\\hline \text { Fund B } & 12 \% & 10 \% & 0.5 \\\hline \text { Fund C } & 22 \% & 20 \% & 1.0 \\\hline \text { S\&P 500 } & 18 \% & 16 \% & 1.0 \\\hline\end{array}$
The fund with the highest Sharpe measure is __________.

• A)Fund A
• B)Fund B
• C)Fund C
• D)Funds A and B are tied for highest

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Definitions:

Negative Communication

Exchange of information laden with negative emotions, misunderstandings, or conflicts.

Feedback

Information provided as a response to an action or process, used for improvement and adjustment purposes.

Communication

The process of exchanging information or expressing ideas, feelings, or instructions through various modes, such as speech, writing, or signals.

Perception

The cognitive process that interprets and gives meaning to sensory information, shaping how one understands their environment and experiences.