You want to evaluate three mutual funds using the Sharpe measure for performance evaluation.The risk-free return during the sample period is 5%.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 investment 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 5%.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 investment 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: (23% - 5%)/30% = 0.60; B: (20% - 5%)/19% = 0.789; C: (19% - 5%)/17% = 0.824; S&P 500: (18% - 5%)/15% = 0.867.

You Want to Evaluate Three Mutual Funds Using the Sharpe