The following data are available relating to the performance of Sooner Stock Fund and the market portfolio: Sooner Market Portfolio Average return 20 % 11 % Standard reviations of returns 44 % 19 % Beta 1.8 1.0 Residual standard deviation 2.0 % 0.0 % The risk-free return during the sample period was 3%. Calculate the Jensen measure of performance evaluation for Sooner Stock Fund. Multiple Choice 4.00% 2.6% 8.67% 31.43% 37.14%

The Jensen measure of performance evaluation for Sooner Stock Fund is 2.6%

Explanation:

In order to calculate the the Jensen measure of performance evaluation for Sooner Stock Fund we would have to calculate Jensen's Alpha as follows:

Jensen's Alpha = R (i) - [R (f) + {B x (R (m) - R (f)) }]

Jensen's Alpha = 20% - [3% + {1.8 x (11% - 3%) }]

Jensen's Alpha = 20% - [3% + 14.4%] = 20% - 17.4%

Jensen's Alpha = 2.6%

The Jensen measure of performance evaluation for Sooner Stock Fund is 2.6%