Question
The mean returns, standard deviations, and betas for three funds and the market are given below: Mean return Std. deviation Beta Fund A 15% 40%
The mean returns, standard deviations, and betas for three funds and the market are given below:
Mean return Std. deviation Beta
Fund A 15% 40% 1.1
Fund B 12.5% 25% 1.0
Fund C 14% 30% 1.3
Market 12% 15% 1.0
The risk-free rate of return is 3%. Assume that the CAPM holds.
a) Compute the alpha for each fund.
b) Compute the Information (Appraisal) ratio for each fund.
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Fundamentals Of Financial Management
Authors: James Van Horne, John Wachowicz
13th Revised Edition
978-0273713630, 273713639
