The following data are available relating to the performance of Sooner Stock Fund and the market portfolio: The risk-free return during the sample period was 3%.
Calculate the information ratio for Sooner Stock Fund.
A)1.53
B)1.30
C)8.67
D)31.43

Question

The following data are available relating to the performance of Sooner Stock Fund and the market portfolio:  The risk-free return during the sample period was 3%.
Calculate the information ratio for Sooner Stock Fund.
A)1.53 
B)1.30 
C)8.67 
D)31.43

Quizplus · Accepted Answer

The information ratio is calculated as the excess return of the portfolio over the benchmark, divided by the tracking error of the portfolio. From the provided data, we can calculate the excess return of Sooner Stock Fund as 18% - 14% - 3% = 1%, and the tracking error as 8%. Therefore, the information ratio is 1%/8% = 0.13 or 1.30 when expressed as a percentage. Therefore, the correct choice is B.

The Following Data Are Available Relating to the Performance of Sooner