Suppose the market risk premium is 9 and the risk free rate


Suppose the market risk premium is 9% and the risk free rate is 6% In a period where the market moved up by 30% during a single year, you observe the following risk and return data for mutual funds:

Fund A: return = 30% and beta = .8

Fund B: return = 34% and beta = 1.2

Fund C: return = 33% and beta = 1.0

Which fund has offered the best risk adjusted return?

Hint: The risk-adjusted return is the difference between the realized return (for example 30% for Fund A) and the expected return according to CAPM

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Financial Management: Suppose the market risk premium is 9 and the risk free rate
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