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. Average ReturnResidual Standard DeviationBetaFund A17.6%10%1.2Fund B17.5%20%1.0Fund C17.4%30%0.8The fund with the highest Jensen measure is
A. Fund A.
B. Fund B.
C. Fund C.
D. Funds A and C (tied for highest).
E. Funds A and B (tied for highest).
Answer: C
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