Question: Consider the following data for a particular sample period: Portfolio A Market portfolio B Mean return 9% 8% Beta 1.25 1.00 Standard deviation 22% 20%

Consider the following data for a particular sample period: Portfolio A Market portfolio B Mean return 9% 8% Beta 1.25 1.00 Standard deviation 22% 20% The interest rate during the period is 3%. The mean return and standard deviation of the market portfolio M is 7% and 18%, respectively.

a) Calculate the performance measures for portfolio A and portfolio B: Sharpe ratio, Jensens alpha, and Treynor measure.

b) Is portfolio A or portfolio B a better choice if it will be used to represent the entire investment fund? Explain your argument..

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