Question

Suppose that you have the following information about four mutual funds. Each is composed of some mix of stocks and bonds.

Name of fund |
Sharpe ratio |

Admiral Fund |
0.1073 |

Bolo Fund |
0.2628 |

Carocol Fund |
0.9252 |

Dresner Fund |
0.5599 |

Suppose that you are limited to these four mutual funds. Among these four, which one is optimal (or, at least, the most optimal)?

Answer #1

Sharpe Ratio is the average return earned in excess of the risk-free rate per unit of volatility or total risk.

Sharpe ratio measures the performance of an investment compared to a risk-free asset, after adjusting for its risk. It is defined as the difference between the returns of the investment and the risk-free return, divided by the standard deviation of the investment.

Name of fund |
Sharpe ratio |
Preference Ranking |

Admiral Fund | 0.1073 | 4 |

Bolo Fund | 0.2628 | 3 |

Carocol Fund |
0.9252 |
1 |

Dresner Fund | 0.5599 | 2 |

As Sharpe Ration gives the Risk adjusted return, the Mutual fund with Higher Sharpe Rationwill be more Optiomal.

From the given Funds, **Carocol Fund**
has the higher Sharpe Ratio and it should be selected as it is
relatively most optimal among the given 4 Funds.

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Calculate the Sharpe ratio and alpha of each fund (b) Assume that
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Fund Q:
Average annual return: 8.21%
Standard deviation: 7.00%
Beta coefficient: 0.921
Fund R:
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Standard deviation: 13.52%
Beta coefficient: 1.100
Fund S:
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Standard deviation: 16.05%
Beta coefficient: 1.825
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You have been given the following return information for a
mutual fund, the market index, and the risk-free rate. You also
know that the return correlation between the fund and the market is
.97.
Year
Fund
Market
Risk-Free
2015
−16.4
%
−32.5
%
3
%
2016
25.1
20.3
4
2017
13.2
11.8
2
2018
6.2
8.0
5
2019
−1.68
−3.2
3
What are the Sharpe and Treynor ratios for the fund?
Sharpe ratio
Treynor ratio

You have been given the following return information for a
mutual fund, the market index, and the risk-free rate. You also
know that the return correlation between the fund and the market is
.97.
Year
Fund
Market
Risk-Free
2015
−17.6
%
−34.5
%
2
%
2016
25.1
20.5
4
2017
13.4
12.4
2
2018
6.6
8.4
5
2019
−1.8
−4.2
3
What are the Sharpe and Treynor ratios for the fund? (Do
not round intermediate calculations. Round your answers to...

You have been given the following return information for a
mutual fund, the market index, and the risk-free rate. You also
know that the return correlation between the fund and the market is
0.97.
Year
Fund
Market
Risk-Free
2011
–21.2
%
–40.5
%
2
%
2012
25.1
21.1
4
2013
14.0
14.2
2
2014
6.2
8.8
4
2015
–2.16
–5.2
3
What are the Sharpe and Treynor ratios for the fund? (Do
not round intermediate calculations. Round your answers to...

You have been given the following return information for a
mutual fund, the market index, and the risk-free rate. You also
know that the return correlation between the fund and the market is
0.97.
Year
Fund
Market
Risk-Free
2011
–21.8
%
–41.5
%
3
%
2012
25.1
21.2
4
2013
14.1
14.5
2
2014
6.4
8.8
4
2015
–2.22
–5.2
3
What are the Sharpe and Treynor ratios for the fund? (Do
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Group of answer choices
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flexible allocation fund
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Group of answer choices
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If you plan to buy and hold for three years, which...

You have been given
the following return information for a mutual fund, the market
index, and the risk-free rate. You also know that the return
correlation between the fund and the market is 0.97.
Year
Fund
Market
Risk-Free
2011
–17.0
%
–33.5
%
2
%
2012
25.1
20.4
6
2013
13.3
12.1
2
2014
6.4
8.0
5
2015
–1.74
–3.2
3
What are the Sharpe
and Treynor ratios for the fund?

You have been given the following return information for a
mutual fund, the market index, and the risk-free rate. You also
know that the return correlation between the fund and the market is
0.97.
Year
Fund
Market
Risk-Free
2011
–15.06
%
–26.5
%
3
%
2012
25.1
19.7
5
2013
12.6
10.0
2
2014
6.6
7.6
4
2015
–1.32
–2.2
3
What are the Sharpe and Treynor ratios for the fund?

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