Q17 You want to evaluate three mutual funds using the information ratio measure for performance evaluation. The risk-free return during the sample period is 4%, and the average return on the market portfolio is 14%. The average return, beta and residual standard deviation for the three funds are given below.

Fund	Average Return	Beta	Residual standard deviation
A	15%	0.75	4.20%
B	18%	0.80	5.40%
C	20%	1.20	5.60%

The fund with the highest information ratio measure is

Select one:

Fund A

Fund B

Fund C

Funds A and B (tied for highest).

Funds A and C (tied for highest).

Q27 The growth in dividends of XYZ Ltd is expected to be 10% per year for the next two years, followed by a growth rate of 5% per year for three years; after this five-year period, the growth in dividends is expected to be 2% per year, indefinitely. The beta of XYZ is 1.50. The risk-free rate (r_f) and the expected return on the market portfolio (E(R_m)) are 3% and 9% respectively. The XYZ paid a dividends per share of $2.00 last year. Using the Capital Asset Pricing Model to determine the required rate of return, what should be the intrinsic value of the stock today?

Select one:

$23.69

$8.99

$41.60

$25.21

$110.00