5. You are trying to decide which fund to recommend to your client. The historical returns

for Fund A and Fund B are below. For Fund A, you will be paid 25 basis points at the

end of each quarter out of your client?s account; for Fund B, you will earn 35 basis points.

Assume that your client has $100 million to invest. Determine which account is likely

to be better for your client and better for you by calculating (a) your client?s account

balance at the end of the eight quarters net of fees; (b) average return divided by standard

deviation as a measure of the risk adjusted return; and (c) your total fees earned for each

fund. Based on these calculations, which account will you recommend and why? Would

there be a difference in the account recommended by an unethical versus ethical advisor? (SEE ATTACHMENT, PLEASE COMPLETE QUESTION 5)

Quarter Fund A

Returns

Fund B

Returns

1 5 3

2 6.5 9

3 3 1

4 4.5 8

5 10 15

6 0.5 ?2

7 4 9

8 3 5

Page 24: Fiduciary Duty of Investment Professionals

https://www.coursehero.com/file/11170584/business-11/

This study resource