Q16. An analyst gathered the following information about the performance of four categories of mutual funds over the same time period:

Mutual Fund Category              Standard Deviation          Sharpe Ratio

1                              18.9%                      0.23

2                              15.4%                      17.35

3                              14.3%                      0.29

4                              12.8%                      0.27

If the returns from all funds were normally distributed, the mutual fund category that minimized the probability of earning less than the risk-free rate of return is most likely category:

A.      1

B.      2

C.      3

D.     4

答案和详解如下：

Q16.   B   07 Modular Level I, Vol.1, pp395-398  Study Sessions 3-9-i

The Sharp ratio is equivalent to using the risk free rate as the shortfall level in Roy’s safety-first criterion. The higher the safety-first ratio, the lower is the probability of earning less than the risk-free rate.

b

thx