1. You plan to hold a portfolio of two funds, a value fund and a growth fund. An advisor has provided you with estimates of the annual return estimates by running regressions of annual returns on the term spread (in %). The results are as follows:

   Regression of annual value fund returns on term spread

   Estimate t-stat Regression R2

   Intercept 0.034 2.22 0.1123

   Slope 0.035 3.16

   Regression of annual growth fund returns on term spread

   Estimate t-stat Regression R2

   Intercept 0.024 2.23 0.1654

   Slope 0.032 3.01

   Suppose that the current term spread is 4 and the riskless rate is 1%. Based on this information, which of the following statements is correct?

   	A.	Assuming that the growth fund has the same return volatility for the next year compared to the value fund, the value fund has a higher Sharpe ratio.
   	B.	In the growth funds predictive regression, the intercept estimate is not statistically significant while the slope is.
   	C.	A decrease in the term spread decreases the growth funds expected return more than the value funds expected return.
   	D.	The term spread explains a higher share of the variation in the value funds returns compared to the growth fund.