You Want to Evaluate Three Mutual Funds Using the Sharpe

Multiple Choice

You want to evaluate three mutual funds using the Sharpe measure for performance evaluation. The risk-free return during the sample period is 5%. The average returns, standard deviations, and betas for the three funds are given below, as are the data for the S&P 500 Index. $\begin{array}{cc} &\text {Average ReturnResidual } &\text { Standard Deviation }&\text { Beta }\\ \text { Fund A } &23\%&30\%&1.3\\ \text {Fund B } &20\%&19\%&1.2\\ \text { Fund C} &19\%&17\%&1.1\\\text {S\&P 500}&18\%&15\%&1.0\end{array}$
The investment with the highest Sharpe measure is

A) Fund A.
B) Fund B.
C) Fund C.
D) the index.
E) Funds A and C (tied for highest) .