Consider the Capital Market Line. Suppose the expected return on the market portfolio is 14%, the risk-free rate is 5%, and the standard deviation of the market portfolio is 27%.

11. If you place 50% of your funds in the market portfolio and the remainder in the risk-free asset, the expected return and the standard deviation of the return on the portfolio are equal to ________ respectively.

a. 14%; 27%

b. 5%; 27%

c. 9.5%; 13.5%

d. 11.75%; 20.25%

e. 18.5%; 40.5%

Exhibit 25-11

USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)

The last year's performance for four mutual funds is presented below. The market return was 10.70%, last year with a standard deviation of 13.1% and the risk-free rate of return was 5%.

		Standard
Fund	Beta	Deviation (%)	Return (%)
A	1.50	18.95	12.5
B	1.20	12.41	13.0
C	0.90	9.30	11.2
D	0.50	8.10	9.5

17. Refer to Exhibit 25-11. Compute the Sharpe Measure for the A fund.

a.	0.012
b.	0.040
c.	0.069
d.	0.396
e.	1.142

18. Refer to Exhibit 25-11. Compute the Jensen Measure for the B fund.

a.

1.16%

b.

2.31%

c.

6.90%

d.

9.60%

e.

10.13%

20. Refer to Exhibit 25-11. Based on the Treynor Measure, which portfolio preformed best?

a.	A
b.	B
c.	C
d.	D
e.	Market