Consider the following information on 3 mutual finds
Fund1 Fund 2 Fund 3
Mean 0.45 0.35 0.10
Volatility 0.8 0.50 0.10
If the risk free is 5%, which one of these could be the market portfolio?
a. Fund1
b. Fund2
c. Fund3
d. Can't tell作者: Maddin 时间: 2011-7-13 14:22
Hmmm I am very unsure about this. The only thing that I could see to calculate based on this is the Sharpe ratio (which is also the slope of the CML I think?) It should be high for the one that's actually the market portfolio given that it is the best combination of risky assets (ie best return per unit of risk). Based on that logic, the answer is B.
But I have no idea if this is on the right track. Anyone?作者: ramdabom 时间: 2011-7-13 14:22
My original thought is that it is fund C because it is perfectly efficient at 0.1/0.1作者: Kiakaha 时间: 2011-7-13 14:22
Good one Kiakaha... I would have never arrived at it... Now that you mention it, I guess the tangent will have the highest slope giving maximum return per unit risk ... i.e. sharpe ratio...作者: hariRaj 时间: 2011-7-13 14:22
Thanks anish, lucky guess
Also it's worth pointing out we won't get any questions like this on the exam, CFAI has a policy of not using answer options like 'all of the above'/'none of the above'/'not enough info to tell' etc:
Say Kiakaha, is there some mail id where I could reach you? I have a question on Sharpe Ratio... I think I am sorely missing some point... If you would rather not share, I would understand...作者: cyber21 时间: 2011-7-13 14:23
