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Section B: Short Questions [ 6 Questions; 1 1 0 Marks ] Question 1 Performance Evaluation ( 2 0 Marks ) You are a financial

Section B: Short Questions [6 Questions; 110 Marks]
Question 1 Performance Evaluation (20 Marks)
You are a financial advisor at a local investment company in Johannesburg. A client has come
to you for professional advice. Based on the clients investment objectives and constraints, you
have identified two possible funds: Fund A and Fund B. You have gathered the following
information to assist you with advising your client:
Fund A Fund B JSE All Share
Index (market
portfolio)
Treasury Bills
Average return 16%12%8%5%
Standard
deviation
9%8%5%0%
Beta 1.211.051.000
Residual
standard
deviation
8%6%00
Required:
1.1. Advise your client on which fund should be selected based on the Sharpe ratio and the M2
measure. (9 marks)
1.2. Advise your client on which fund should be selected based on the Treynor ratio and the T2
measure. (9 marks)
1.3. Advise your client of your final recommendation if the selected fund is going to be a standalone fund that will not be combined with other securities (2 marks)

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