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The risk-free rate, average returns, standard deviations, and betas for three funds and the S&P 500 are given below: Fund Average returns Standard deviations Betas
The risk-free rate, average returns, standard deviations, and betas for three funds and the S&P 500 are given below:
Fund | Average returns | Standard deviations | Betas |
A | 21% | 30% | 1.4 |
B | 30% | 40% | 1.2 |
C | 18% | 20% | 0.8 |
S&P 500 | 15% | 20% | 1 |
rf | 2% |
|
|
a. What is the Treynor measure for portfolio A?
b. What is the M2 measure for portfolio B?
c. If these portfolios are subcomponents that make up part of a well-diversified portfolio, then portfolio _______ is preferred.
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