You wish to compare the performance of a small growth fund to that of the Nasdaq

Question

You wish to compare the performance of a small growth fund to that of the Nasdaq index. The growth fund has an average return of 14% and a standard deviation of 17% The Nasdaq index has an average return of 20% and a standard the risk-free rate is 2%, what is the M2 measure for this fund (compared to the benchmark)? 28. deviation of 23%. If Nasdaq A) B) C) D) E) -9. 132% -1.765% 0 2.015% 3.32090 29. You purchase one IBM July 120 call option contract for a premium of $5 per share. You hold the option until the expiration date when IBM stock sells for $123 per share. You will realize a on the investment -_ A) $200 profit ) $200 loss $300 profit ) $300 loss Other things being equal, a(n) option will be valuable than a option American, more, European American, less, European call, more, put call, less, put

Explanation / Answer

Answer 28

M2=(RpRf)×m/p(RmRf)

M2=(142)×23/17(202)

M2=(12)×23/17(18)

M2=-1.765%

Correct answer is B

Answer 30 correct answer is A, American options possess every characteristic of European options and one additional trait: They can be exercised at any time prior to expiration. Early exercise cannot be required, so the right to exercise early cannot have negative value. Thus, American options is worth more than European options

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