You have just read the annual report of a mutual fund. It boasted of a 26% return and advertised that it had beat the market return last year by three percentage points
In doing some research you discover the fund had a beta of +1.5 and the return on risk-free Treasury securities was 15.0%. Assuming a market risk premium of 8.0% should be used to evaluate performance means that
A)
the fund's performance was impressive; three percentage points is significant, given the above data.
B)
the fund's performance was good, but not impressive; it beat the market, but only by one percentage point not three.
C)
the fund's performance was no better than what you would have expected.
D)
the fund's performance was actually a percentage point less than what you would have expected.
D
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