The following data are available relating to the performance of Wildcat Fund and the market portfolio: $$\begin{array} { | l | l | l | }
\hline & \text { Wildeat } & \text { Market Portfolio } \
\hline \text { Average Return } & 18 \% & 15 \% \
\hline \text { Standard Deviation of Returns } & 25 \% & 20 \% \
\hline \text { Beta } & 1.25 & 1.00 \
\hline \text { Residual Standard Deviation } & 2 \% & 0 \% \
\hline
\end{array}$$ The risk-free return during the sample period was 7%.
-Calculate Jensen's measure of performance for Wildcat Fund.
A)1.00%
B)8.80%
C)44.00%
D)50.00%
E)none of the above

Question

The following data are available relating to the performance of Wildcat Fund and the market portfolio: $$\begin{array} { | l | l | l | } 
\hline & \text { Wildeat } & \text { Market Portfolio } \
\hline \text { Average Return } & 18 \% & 15 \% \
\hline \text { Standard Deviation of Returns } & 25 \% & 20 \% \
\hline \text { Beta } & 1.25 & 1.00 \
\hline \text { Residual Standard Deviation } & 2 \% & 0 \% \
\hline
\end{array}$$ The risk-free return during the sample period was 7%.
-Calculate Jensen's measure of performance for Wildcat Fund.
A)1.00%
B)8.80%
C)44.00%
D)50.00%
E)none of the above

Quizplus · Accepted Answer

Jensen's measure is calculated as: $ \alpha = R_i - [R_f + \beta_i (R_m - R_f)] $. For Wildcat Fund: $ \alpha = 18\% - [7\% + 1.25(15\% - 7\%)] = 1\% $.

The Following Data Are Available Relating to the Performance of Wildcat