You want to evaluate three institutional funds using the information ratio measure for performance evaluation. The risk-free return during the sample period is 3%,
You want to evaluate three institutional funds using the information ratio measure for performance evaluation. The risk-free return during the sample period is 3%, and the equity risk premium is 8%. The average returns, residual standard deviations, and betas for these three institutional funds are given below: Fidelity Amerifund Blackrock Return 10% 8% 6% Residual Standard deviation 25% 10% 15% Beta 1.20 0.80 1.00 Based on the Information Ratio of performance evaluation, which of the following institutional funds represents a profitable investment opportunity?
Step by Step Solution
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There are 3 Steps involved in it
Step: 1
To calculate the information ratio for each institutional fund well first need to determine the exce...See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
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