The following data are available relating to the performance of Tiger Fund and the market portfolio: $\begin{array}{lcc}
& \text {Tiger } & \text { Market } \
&&\text { Portfolio }\
\text { Average return } & 18 \% & 15\% \
\text { Standard deviations of returns } & 25\% & 20\% \
\text { Beta } & 1.25 & 1.00 \
\text { Residual standard deviation } &2 \% & 0 \%
\end{array}$
The risk-free return during the sample period was 7%.
Calculate Jensen's measure of performance for Tiger Fund.
A) 1.00%
B) 8.80%
C) 44.00%
D) 50.00%

Question

The following data are available relating to the performance of Tiger Fund and the market portfolio: $\begin{array}{lcc} 
& \text {Tiger } & \text { Market } \  
&&\text { Portfolio }\
\text { Average return } & 18 \% & 15\% \
\text { Standard deviations of returns } & 25\% & 20\% \
\text { Beta } & 1.25 & 1.00 \
\text { Residual standard deviation } &2 \% & 0 \%
\end{array}$ 
 The risk-free return during the sample period was 7%.
Calculate Jensen's measure of performance for Tiger Fund.
A) 1.00%
B) 8.80%
C) 44.00%
D) 50.00%

Quizplus · Accepted Answer

Jensen's measure is calculated as: $ \alpha = R_i - [R_f + \beta_i (R_m - R_f)] $. For Tiger Fund: $ \alpha = 18\% - [7\% + 1.25(15\% - 7\%)] = 1.00\% $.

The Following Data Are Available Relating to the Performance of Tiger