The following data are available relating to the performance of Monarch Stock Fund and the market portfolio: $$\begin{array} { | l | l | l | }
\hline & \text { Monarch } & \text { Market Portfolio } \
\hline \text { Average Return } & 16 \% & 12 \% \
\hline \text { Standard Deviation of Returns } & 26 \% & 22 \% \
\hline \text { Beta } & 1.15 & 1.00 \
\hline \text { Residual Standard Deviation } & 1 \% & 0 \% \
\hline
\end{array}$$ The risk-free return during the sample period was 4%.
-Calculate Sharpe's measure of performance for Monarch Stock Fund.
A)1.00%
B)46.00%
C)44.00%
D)50.00%
E)none of the above

Question

The following data are available relating to the performance of Monarch Stock Fund and the market portfolio: $$\begin{array} { | l | l | l | } 
\hline & \text { Monarch } & \text { Market Portfolio } \
\hline \text { Average Return } & 16 \% & 12 \% \
\hline \text { Standard Deviation of Returns } & 26 \% & 22 \% \
\hline \text { Beta } & 1.15 & 1.00 \
\hline \text { Residual Standard Deviation } & 1 \% & 0 \% \
\hline
\end{array}$$ The risk-free return during the sample period was 4%.
-Calculate Sharpe's measure of performance for Monarch Stock Fund.
A)1.00%
B)46.00%
C)44.00%
D)50.00%
E)none of the above

Quizplus · Accepted Answer

Sharpe's measure of performance is calculated as:Sharpe's measure = (Average return - Risk-free return) / Standard deviation of returnsFor Monarch Stock Fund, Sharpe's measure is:Sharpe's measure = (16% - 4%) / 26% = 46%

The Following Data Are Available Relating to the Performance of Monarch