Question: Use the following information to answer questions a. - e. Standard Fund or Return Deviation Sharpe Asset (%) (%) Beta Alpha Ratio Risk-free 4 0

Use the following information to answer questions a. - e. Standard Fund or Return Deviation Sharpe Asset (%) (%) Beta Alpha Ratio Risk-free 4 0 0 n.a. n.a. Market 11 18 1 0 0.389 Fund A 9 20 0.4 2.2 0.250 Fund B 10 12 1.1 ? ? a. What is the alpha for fund B? b. Based on alpha, which fund displays superior performance? c. What is the Sharpe ratio for fund B? d. Based on the Sharpe ratio, which fund displays superior performance? e. Suppose you were using this information to recommend a portfolio to your client. What additional evidence would make you more confident that the fund you recommend has the ability to achieve superior perform in the future? (Hint: The answer has nothing to do with the Treynor Index.)

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