Question: The risk-free rate, average returns, standard deviations, and betas for three funds and the S&P 500 are given below. Suppose the risk-free rate = 4.

The risk-free rate, average returns, standard deviations, and betas for three funds and the S&P 500 are given below. Suppose the risk-free rate = 4.

Fund

Avg

Std Dev

Beta

A

10.6

40

1.4

B

12.6

25

0.9
  • Compute the Treynor measure for Fund A and Sharpe ratio for Fund B. Suppose a = A's Treynor ratio and b = B's Sharpe ratio. Compute a + b and enter your answer below. Disregard % and just use the given numbers as is.
    • For example, if a = 1.3 and = 0.7, then your answer should be 2.00.
    • Round your answer to two decimal places.
  • Which fund performs better with respect to Treynor and Sharpe?

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