The following data are available relating to the performance of Wildcat Fund and the market portfolio: $$\begin{array} { | l | l | l | }
\hline & \text { Wildeat } & \text { Market Portfolio } \
\hline \text { Average Return } & 18 \% & 15 \% \
\hline \text { Standard Deviation of Returns } & 25 \% & 20 \% \
\hline \text { Beta } & 1.25 & 1.00 \
\hline \text { Residual Standard Deviation } & 2 \% & 0 \% \
\hline
\end{array}$$ The risk-free return during the sample period was 7%.
-What is the information ratio measure of performance evaluation for Wildcat Fund?
A)1.00%
B)8.80%
C)44.00%
D)50.00%
E)none of the above

Question

The following data are available relating to the performance of Wildcat Fund and the market portfolio: $$\begin{array} { | l | l | l | } 
\hline & \text { Wildeat } & \text { Market Portfolio } \
\hline \text { Average Return } & 18 \% & 15 \% \
\hline \text { Standard Deviation of Returns } & 25 \% & 20 \% \
\hline \text { Beta } & 1.25 & 1.00 \
\hline \text { Residual Standard Deviation } & 2 \% & 0 \% \
\hline
\end{array}$$ The risk-free return during the sample period was 7%.
-What is the information ratio measure of performance evaluation for Wildcat Fund?
A)1.00%
B)8.80%
C)44.00%
D)50.00%
E)none of the above

Quizplus · Accepted Answer

The information ratio is calculated as the excess return of the fund over the risk-free rate divided by the residual standard deviation. For Wildcat Fund, the excess return is 18% - 7% = 11%. The information ratio is 11% / 2% = 5.50 or 50.00%.

The Following Data Are Available Relating to the Performance of Wildcat