You Want to Evaluate Three Mutual Funds Using the Information

You want to evaluate three mutual funds using the information ratio measure for performance evaluation. The risk-free return during the sample period is 6%, and the average return on the market portfolio is 19%. The average returns, residual standard deviations, and betas for the three funds are given below. $\begin{array}{c}\begin{array}{lll}\text { } \\\text { } \\\text { } \\\text { Fund A } \\\text { Fund B } \\\text { Fund C } \\\end{array}\begin{array}{lll}\text { } \\\text { Average } \\\text {Return } \\20\% \\21\% \\23\% \\\end{array}\begin{array}{lll}\text {Residual } \\\text { Standand } \\\text { Deviation.} \\\text {4.00\% } \\\text {1.25\% } \\\text { 1.20\% } \\\end{array}\begin{array}{lll}\text { } \\\text { } \\\text {Beta } \\\text { 0.8 } \\\text { 1.0 } \\\text { 1.2 } \\\end{array}\end{array}$
The fund with the highest information ratio 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) .

Correct Answer:

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