Unit 22

Question 1

The total return of a mutual fund is equal to

Answer 1

the return attained by reinvestment of all dividend and capital gains distributions plus unrealized gains or minus unrealized losses

As with all securities, total return includes unrealized gains or losses. In the case of mutual funds, the total return also assumes reinvestment of all dividend and capital gains distributions.

Question 2

Total return

Answer 2

includes unrealized gains or losses

Question 3

When, as per the Sharpe ratio, a stock exhibits superior performance, it implies

Answer 3

High alpha

Beta is not apart of sharpe ratio

The higher the Sharpe ratio, the higher the risk-adjusted return. In other words, the stock is returning significantly more than the risk-free rate. That will result in a positive alpha. Beta is not part of the Sharpe ratio.