You have estimated the single index model (SIM) fund B and found that its alpha and beta are 0.035 and 1.1respectively. The standard deviation of Fund B's excess returns is 30% and the market portfolio excess returns have astandard deviation of 20%. What's the information ratio of Fund B?

To find the information ratio of Fund B, we need to calculate two key components: the tracking error…

Answered: You have estimated the single index…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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You have estimated the single index model (SIM) fund B and found that its alpha and beta are 0.035 and 1.1 respectively. The standard deviation of Fund B's excess returns is 30% and the market portfolio excess returns have a standard deviation of 20%. What's the information ratio of Fund B?