Compute the alpha for fund

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The mean returns, standard deviations, and betas for three funds and the market are given below:

Mean return Std. deviation Beta

Fund A 15% 40% 1.1

Fund B 12.5% 25% 1.0

Fund C 14% 30% 1.3

Market 12% 15% 1.0

The risk-free rate of return is 3%. Assume that the CAPM holds.

a) Compute the alpha for each fund.

b) Compute the Information (Appraisal) ratio for each fund.

Reference no: EM133127144

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