The Mark Fund had a rate of return of 18% last year.If its beta weight was +1.5 and if the return on the overall market was 15%,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 fund's beta from the actual return. The expected return is the market return (15%) multiplied by the beta (1.5), which equals 22.5%. The actual return was 18%, so the RAROR is 18% - 22.5% = -3.0%.

The Mark Fund Had a Rate of Return of 18