QUESTION 33

1. A financial adviser manages an equity portfolio for an endowment fund, which has an 8.2% return objective. The adviser makes a strategic allocation recommendation that produces a return of 8.5% in an economy that has experienced a 2.9% rate of inflation. The advisor also creates her own benchmark for the fund which includes multiple indexes that have similar risk profiles of the securities in the fund. The benchmark return during the period is 8.9%. Is the endowment fund satisfied with the advisor's performance?

   		a. Yes, because the fund outperformed inflation.
   		b. Yes, because the fund outperformed the return objective.
   		c. Yes, because the benchmark return is not relevant.
   		d. No, because the fund underperformed the benchmark.

QUESTION 34

1. The Pacific Fund earns 12.9% during the year while the risk-free rate is 4.2%. The Pacific Fund has a beta of 1.35 and a standard deviation of 18.7%. The Treynor Ratio is closest to:

   		a. 0.465.
   		b. 0.689.
   		c. 6.444.
   		d. 9.555.