You want to evaluate three mutual funds using the Sharpe measure for performance evaluation. The risk-free return during the sample period is 6%. The average returns, standard deviations, and betas for the three funds are given below, as are the data for the S&P 500 Index.

The fund with the highest Sharpe measure is
A) Fund A.
B) Fund B.
C) Fund C.
D) Funds A and B (tied for highest).
E) Funds A and C (tied for highest).

Question

You want to evaluate three mutual funds using the Sharpe measure for performance evaluation. The risk-free return during the sample period is 6%. The average returns, standard deviations, and betas for the three funds are given below, as are the data for the S&P 500 Index.

The fund with the highest Sharpe measure is

The fund with the highest Sharpe measure is
A) Fund A. 
B) Fund B. 
C) Fund C. 
D) Funds A and B (tied for highest). 
E) Funds A and C (tied for highest).

Quizplus · Accepted Answer

A: (24% − 6%)/30% = 0.60; B: (12% − 6%)/10% = 0.60; C: (22% − 6%)/20% = 0.80; S&P 500: (18% − 6%)/16% = 0.75.

You Want to Evaluate Three Mutual Funds Using the Sharpe