Suppose the market risk premium is 9% and the risk free rate is 6% In a period where the market moved up by 30% during a single year, you observe the following risk and return data for mutual funds:
Fund A: return = 30% and beta = .8
Fund B: return = 34% and beta = 1.2
Fund C: return = 33% and beta = 1.0
Which fund has offered the best risk adjusted return?
Hint: The risk-adjusted return is the difference between the realized return (for example 30% for Fund A) and the expected return according to CAPM