You Want to Evaluate Three Mutual Funds Using the Jensen

Multiple Choice

You want to evaluate three mutual funds using the Jensen measure for performance evaluation. The risk-free return during the sample period is 6%, and the average return on the market portfolio is 18%. The average returns, standard deviations, and betas for the three funds are given below. $\begin{array}{cc} &\text {Average ReturnResidual } &\text { Standard Deviation }&\text { Beta }\\ \text { Fund A } &17.6\%&10\%&1.2\\ \text {Fund B } &17.5\%&20\%&1.0\\ \text { Fund C} &17.4\%&30\%&0.8\\\end{array}$

The fund with the highest Jensen measure is

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