likaiba

 

The correct answer is C

(15 ? 4) / 28 = 0.39

 

likaiba

 

21、Which Sharpe ratio indicates that Fund One earned a return on investment that is greater than the risk taken by the fund?

A) 1.5.

B) 0.5.

C) 1.0.

D) 0.

likaiba

 

The correct answer is A

A Sharpe ratio of 1 indicates the risk and return of the investment are proportional, while a lower ratio indicates greater risk was taken and a higher ratio indicates less risk was taken to generate the return on investment.

 

likaiba

 

22、Over the previous year, the average and variance of a portfolio’s returns was 0.18 and 0.09. The risk-free rate over the period was 0.03. The Sharpe ratio for the portfolio for the previous year is:

A) 0.5. 

B) 0.6. 

C) 1.5. 

D) 3.0.

likaiba

 

The correct answer is A

The Sharpe ratio is the difference between the average of the portfolio’s return minus the risk-free rate, 0.15 = 0.18 ? 0.03, divided by the standard deviation, which is the square root of the variance: 0.3 = 0.090.5. The Sharpe ratio is 0.5 = 0.15/0.3.

 

likaiba

 

23、An investment committee is changing the asset allocation of its portfolio to include large capitalization growth stocks. The committee is interviewing five potential fund managers. Which of the following risk-adjusted measures of performance should the committee rely upon to choose a manager?

A) Treynor measure.

B) Sharpe measure.

C) Information ratio.

D) M-squared measure.

likaiba

 

The correct answer is A

An investor comparing different funds in the same category should use the Treynor measure. Compare each fund’s Treynor ratio and select the fund with the highest Treynor ratio.

 

likaiba

 

24、The efficient market portfolio had a return of 12%. The risk-free rate was 6%. A portfolio has a beta of 1.2. If the portfolio return was 12%, which of the following is closest to the Treynor ratio for the portfolio?

A) 1.

B) 0.20.

C) 0.05.

D) 0. 

likaiba

 

The correct answer is C

The Treynor ratio is the difference between the portfolio return and the risk-free rate divided by the beta: 0.05 = (0.12 - 0.06) / 1.2.

 

likaiba

 

25、The efficient market portfolio had a return of 14%. The risk-free rate was 5%. A portfolio has a beta of 0.8. If the portfolio return was 11%, then Jensen’s alpha for the portfolio equals:

A) +3.000%.

B) -1.200%.  

C) +8.000%.

D) -0.375%.