There are two actively managed mutual funds P and Q with information of their historical returns given below. Their benchmark is the market portfolio whose information is also given in the table. Risk-free rate = 2%.

A. Calculate M-square of Fund Q.

B. Calculate the treynor measure of fund P and Q

C. Suppose you are the portfolio manager of a large endowment fund and build portfolios based on multiple actively managed funds, i.cfund of funds. Now you want to select actively managed fund to be added to your existing portfolio, Which fund is a better choice out of funds P and Q, and why?

6. (12 points) There are two actively managed mutual funds P and Q with information of their historical returns given below. Their benchmark is the market portfolio whose information is also given in the table. Risk-free rate=2%. Fund P Average return 10% Average excess return 8% Standard deviation 16% M-square 4% Beta A) (8 pts) Calculate M-square of fund Q. Fund Q 12% 10% 25% Market Portfolio 8% 6% 0.5 B) (2 pts) Calculate the Treynor measure of fund P and Q. C) (2 pts) Suppose you are the portfolio manager of a large endowment fund and build portfolios based on multiplo actively managed funds, i.c., fund of funds. Now you want to select one more actively managed fund to be added to your existing portfolio. Which fund is a better choice out of funds P and Q. and why