Investment Problems

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Complete Problem 22 in the Questions and Problems section of Chapter 13 (shown below).  When you pick the best choice for your portfolio, defend your decision in a one-page essay following APA guidelines.

 

You have been given the following return information for two mutual funds (Papa and Mama), the market index, and the risk-free rate.

Year Papa Fund Mama Fund Market Risk-Free
2008 -12.6% -22.6 -24.5% 1%
2009 25.4 18.5 19.5 3
2010 8.5 9.2 9.4 2
2011 15.5 8.5 7.6 4
2012 2.6 -1.2 -2.2 2

 

Calculate the Sharpe ratio, Treynor ratio, Jensen’s alpha, information ratio, and R-squared for both funds and determine which is the best choice for your portfolio