The following data are available relating to the performance of ScoonerStock Fund and the market portfolio: $\begin{array}{lcc}
& \text { Scooner } & \text { Market } \
&&\text { Portfolio }\
\text { Average return } & 19 \% & 12\% \
\text { Standard deviations of returns } & 35\% & 15\% \
\text { Beta } & 1.5 & 1.0 \
\text { Residual standard deviation } & 3.0 \% & 0.0 \%
\end{array}$

The risk-free return during the sample period was 6%.
Calculate the information ratio for ScoonerStock Fund.
A) 1.33
B) 4.00
C) 8.67
D) 31.43
E) 37.14

Question

The following data are available relating to the performance of ScoonerStock Fund and the market portfolio: $\begin{array}{lcc} 
& \text { Scooner } & \text { Market } \
&&\text { Portfolio }\
\text { Average return } & 19 \% & 12\% \
\text { Standard deviations of returns } & 35\% & 15\% \
\text { Beta } & 1.5 & 1.0 \
\text { Residual standard deviation } & 3.0 \% & 0.0 \%
\end{array}$

The risk-free return during the sample period was 6%.
Calculate the information ratio for ScoonerStock Fund.
A) 1.33
B) 4.00
C) 8.67
D) 31.43
E) 37.14

Quizplus · Accepted Answer

The information ratio is calculated as the difference in returns between the fund and the market, divided by the residual standard deviation. For ScoonerStock Fund, it is (19% - 12%) / 3% = 7% / 3% = 2.33.

The Following Data Are Available Relating to the Performance of ScoonerStock