Use the following to answer questions a. – f.
a. What is the alpha for Fund B?
b. Based on alpha, which fund displays superior performance?
c. What is the Sharpe ratio for Fund B?
d. Based on the Sharpe ratio, which fund displays superior performance?
e. Suppose you are an investment counselor with a new client, Jonsey, and that Funds A and B are the only options available in Jonsey's company sponsored retirement account. Jonsey has no other investments. Which fund would you recommend, and why?
f. What additional evidence would make you more confident in your recommendation, that is, more confident that the fund you recommend has the ability to perform in the future? (Hint: The answer has nothing to do with the Treynor Index.)
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