You Have Just Read the Annual Report of a Mutual

question 43

Multiple Choice

You have just read the annual report of a mutual fund.It boasted of a 26% return and advertised that it had beat the market return last year by three percentage points.In doing some research you discover the fund had a beta of +1.5 and the return on risk-free Treasury securities was 15.0%.Assuming a market risk premium of 8.0% should be used to evaluate performance means that

• A)the fund's performance was impressive;three percentage points is significant,given the above data.
• B)the fund's performance was good,but not impressive;it beat the market,but only by one percentage point not three.
• C)the fund's performance was no better than what you would have expected.
• D)the fund's performance was actually a percentage point less than what you would have expected.

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