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The following data are available relating to the performance of Seminole Fund and the market portfolio: Seminole Market Portfolio Average return 18%...

The following data are available relating to the performance of Seminole Fund and the market portfolio:

 

  Seminole Market Portfolio

Average return 18% 14%

Standard deviations of returns 30% 22%

Beta 1.4  1.0 

Residual standard deviation 4.0% 0.0%

 

The risk-free return during the sample period was 6%.


(1) If you wanted to evaluate the Seminole Fund using the M2 measure, what percent of the adjusted portfolio would need to be invested in T-Bills? (correct answer 27%)

(2) Calculate the M2 measure for the Seminole Fund.(Correct answer 0.8%)

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