You want to evaluate three mutual funds using the Sharpe measure for performance evaluation.The risk-free return during the sample period is 6%.The average returns,standard deviations and betas for the three funds are given below,as is the data for the S&P 500 index. $$\begin{array}{l}
\begin{array} { l l l l }
\text { Average Return } & \text { Standard Deviation }&\text { Beta } \
\text { Fund A } &24 \% & 30 \% & 1.5\
\text { Fund B } &12\%&10\%&0.5\
\text { Fund C } &22\%&20\%&1.0\
\text { S\&P 500 } &18\% &16\% &1.0
\end{array}
\end{array}$$
The fund with the highest Sharpe measure is _________.

Question

You want to evaluate three mutual funds using the Sharpe measure for performance evaluation.The risk-free return during the sample period is 6%.The average returns,standard deviations and betas for the three funds are given below,as is the data for the S&P 500 index. $$\begin{array}{l}
\begin{array} { l l l l } 
\text { Average Return } & \text { Standard Deviation }&\text { Beta } \
\text { Fund A } &24 \% & 30 \% & 1.5\
\text { Fund B } &12\%&10\%&0.5\
\text { Fund C } &22\%&20\%&1.0\
\text { S\&P 500 } &18\% &16\% &1.0
\end{array}
\end{array}$$
The fund with the highest Sharpe measure is _________.

Quizplus · Accepted Answer

The Sharpe measure is calculated as (Average Return - Risk-Free Rate) / Standard Deviation. For Fund A: (24% - 6%) / 30% = 0.6. For Fund B: (12% - 6%) / 10% = 0.6. For Fund C: (22% - 6%) / 20% = 0.8. Fund C has the highest Sharpe measure.

You Want to Evaluate Three Mutual Funds Using the Sharpe