The following data are available relating to the performance of Wildcat Fund and the market portfolio: Wildcat Market Portfolio Average return Standard deviations of returns 15% 25% 15% 20% Beta Residual standard deviation 1

Finance Aug 05, 2020

The following data are available relating to the performance of Wildcat Fund and the market portfolio:
Wildcat Market Portfolio Average return Standard deviations of returns 15% 25% 15% 20% Beta Residual standard deviation 1.225% 1.000%
The rislc-free return during the sample period was 7%.
Calculate Jensen's measure of performance for Padcat Fund.

A.1.00%

B.8.80%

C.50.00%

D.44.00%

Expert Solution

Computation of Jensen's Measure of Performance for Wildcat Fund:

Using CAPM model,

Required Rate = 0.07 + 1.25(0.15 - 0.07)

Required Rate = 17.00%

Alpha = 0.18 - 0.17

Jenson Alpha = 1.00%

So, the correct option is A.

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