(a) The data in the table below has been collected by John Akoth to appraise the performance of four asset management firms: Fund 1 Fund 2 Fund 3 Fund 4 Market Index Return 6.45%8.96%9.44%5.82%7.60% Beta 0.881.021.360.81 Standard Deviation 2.74%4.54%3.72%2.64%2.80% Required If the risk-free rate of return for the relevant period is 3%, calculate the following: (i) Ex post alpha ratio. (ii) Treynor measure. (iii) Sharpe ratio. (iv) M2. (v) Rank the funds using a radar chart and state which one you would select.

Given DataFundReturn (%)BetaStandard Deviation (%)Fund 16.45%0.882.74%Fund 28.96%1.024.54%Fund…

Answered: (a) The data in the table below has…

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter6: Risk And Return

Section: Chapter Questions

Problem 1Q

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(a) The data in the table below has been collected by John Akoth to appraise the performance of four asset management firms:

	Fund 1	Fund 2	Fund 3	Fund 4	Market Index
Return	6.45%	8.96%	9.44%	5.82%	7.60%
Beta	0.88	1.02	1.36	0.8	1
Standard Deviation	2.74%	4.54%	3.72%	2.64%	2.80%


Required
If the risk-free rate of return for the relevant period is 3%, calculate the following:

(i) Ex post alpha ratio.

(ii) Treynor measure.

(iii) Sharpe ratio.

(iv) M2.

(v) Rank the funds using a radar chart and state which one you would select.