Based on the Jensen performance index, which fund should the investor continue to hold given the following information?

  FUND 1 FUND 2
Return on Portfolio 13% 17%
Beta .95 1.02
Standard Deviation .18 .22

Risk-free rate of return is 7%

Market return is 15%

  1. Fund 1
  2. Fund 2
  3. Both Fund 1 and 2
  4. Neither Fund 1 nor 2