|
Fund Return
|
Standard Deviation
|
Beta
|
|
A 14
|
6
|
1.5
|
|
B 12
|
4
|
0.5
|
|
C 16
|
8
|
1.0
|
|
D 10
|
6
|
0.5
|
|
E 20
|
10
|
2
|
1. For the above data, what is the differential return if beta is the appropriate measure of risk?
2. Assume that the zero-beta form of the capital asset pricing model (CAPM) is appropriate. What is the differential return For the above data, if Rz = 4%?
3. For funds A and B in Problem 1, how much would the return on B have to change to reverse the ranking using the reward-to-variability measure?