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:

Anorexia

An eating disorder characterized by an obsessive fear of gaining weight, leading to a refusal to eat enough food and, consequently, severe weight loss.

Irritability

A state of increased annoyance or touchiness, often as a symptom of stress or certain medical conditions.

Empirical Support

Evidence that is based on observation or experiment, supporting the effectiveness or validity of a concept or treatment.

Anorexia Nervosa

An eating disorder characterized by an obsessive fear of gaining weight, leading to severely restricted food intake and starvation in pursuit of thinness.