1. The risk-free rate, S&P 500 index, and the average return, standard deviation, beta, and residual standard deviation for three funds are given.

Fund	Avg. Return	Std. Dev.	Beta	Residual Std. Dev.
A B C S&P 500 Risk-free	20% 25% 22% 15% 5%	19% 30% 20% 15% 0%	1.2 1.4 1.1 1.0 0	6.08% 21.42% 11.30% 0.00%

1. Figure out the M²measure for Funds A and B and choose a better fund based on the M² measure. (30points)
2. Figure out the Information ratio of Funds B and C and choose a better fund based on the information ratio. (30points)

Answer rating: 100% (QA)

Fund A and B M2 Measure M2 is a riskadjusted performance measure that takes into account the total risk of a fund systematic nonsystematic For Fund A ... View the full answer