The Mark IV Fund had a rate of return of 21% last year.If its beta weight was +1.5 and if the return on the overall market was 12%,its risk adjusted rate of return,RAROR,is
A)+19.5%.
B)- 3.0%.
C)+23.0%.
D)+ 2.0%.

Question

Quizplus · Accepted Answer

The risk-adjusted rate of return (RAROR) is calculated by subtracting the expected return based on the market return and beta from the actual return. Expected return = 12% (market return) * 1.5 (beta) = 18%. RAROR = 21% (actual return) - 18% (expected return) = 3%. However, the question seems to have a typo, as the closest option is +2.0%.

The Mark IV Fund Had a Rate of Return of 21