Question
Schwab Capital Fund is an open-end equity indexed mutual fund. The fund invests in the public equity markets of the United States. The fund seeks
Schwab Capital Fund is an open-end equity indexed mutual fund. The fund invests in the public equity markets of the United States. The fund seeks to track the performance of the S&P 500 Index. You performed the following regression analysis to evaluate the performance of Schwab Capital Fund in the past one-year period. Using the following regression on monthly pricing information, the fund excess return, alpha, and residual standard deviation reported in the table below have been annualised. The annual excess return on S&P 500 index in the past one year was 30.37%.
c. Calculate the funds annual Sharpe ratio.
\begin{tabular}{|l|l|c|c|c|c|} \hline Fund & (Annual) Fund Excess Return, (Rs- & Rf ) (Annual) Alpha & Beta & R-square & (Annual) Residual Standard Deviation, \\ \hline Schwab Fund & 30.46% & 1.69% & 0.95 & 0.9722 & 0.021 \\ \hline \end{tabular}Step by Step Solution
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