Fund A has an expected return of 9.5%, a standard deviation of 15.6% and a beta of

Fantastic news! We've Found the answer you've been seeking!

Question:

Fund A has an expected return of 9.5%, a standard deviation of 15.6% and a beta of 0.95.
Fund B has an expected return of 11.5%, a standard deviation of 17.8% and a beta of 1.10.
The S&P 500 index has an expected return of 10.5%, a standard deviation of 16.2% and a beta of 1.00.
The T-bill has an expected return of 4.5%
What would happen if Fund A’s beta increased to more than the beta of Fund B? Hold all else constant.

A’s Treynor’s ratio would increase and it would be a buy

A’s Treynor’s ratio would increase and it would not be a buy

A’s Treynor’s ratio would decrease and it would be a buy

A’s Treynor’s ratio would decrease and it would not be a buy