LOS f: Contrast and interpret alternative measures of portfolio risk and risk-adjusted portfolio performance.

Q1. Advanced quantitative models (AQM) global equity fund has averaged a return of 12.5% per year over the last 10 years. The benchmark average return over the same period was 11% per year. The risk-free rate of return during the same period averaged 3.50%. The standard deviation of the fund’s return is 16.15%, and the standard deviation of the surplus return is 10.50%.

What is the Information Ratio for the fund?

A)   1.05.

B)   0.14.

C)   0.86.

Q2. What is the Sharpe Ratio for the fund?

A)   0.56.

B)   1.19.

C)   0.14.

Q3. ABC fund earned a total return of 19.5% for calendar year 2003. Its benchmark return during the same period of time is 17.50%. The risk-free rate of return for the period was 2.0%. ABC’s standard deviation is 16% and the standard deviation of the benchmark is 12%. Did the fund outperform its benchmark based on the Sharpe ratio?

A)   No, the Sharpe ratio of the fund is 1.29 versus 1.09 for the benchmark.

B)   Yes, the Sharpe ratio of the fund is 1.09 versus 1.29 for the benchmark.

C)   No, the Sharpe ratio of the fund is 1.09 versus 1.29 for the benchmark.

LOS f: Contrast and interpret alternative measures of portfolio risk and risk-adjusted portfolio performance. fficeffice" />

Q1. Advanced quantitative models (AQM) global equity fund has averaged a return of 12.5% per year over the last 10 years. The benchmark average return over the same period was 11% per year. The risk-free rate of return during the same period averaged 3.50%. The standard deviation of the fund’s return is 16.15%, and the standard deviation of the surplus return is 10.50%.

What is the Information Ratio for the fund?

A)   1.05.

B)   0.14.

C)   0.86.

Correct answer is B)

Information Ratio = (12.50?11)/10.5 = 0.14

Q2. What is the Sharpe Ratio for the fund?

A)   0.56.

B)   1.19.

C)   0.14.

Correct answer is A)

Sharpe Ratio = (12.50?3.50)/16.15 = 0.56

Q3. ABC fund earned a total return of 19.5% for calendar year 2003. Its benchmark return during the same period of time is 17.50%. The risk-free rate of return for the period was 2.0%. ABC’s standard deviation is 16% and the standard deviation of the benchmark is 12%. Did the fund outperform its benchmark based on the Sharpe ratio?

A)   No, the Sharpe ratio of the fund is 1.29 versus 1.09 for the benchmark.

B)   Yes, the Sharpe ratio of the fund is 1.09 versus 1.29 for the benchmark.

C)   No, the Sharpe ratio of the fund is 1.09 versus 1.29 for the benchmark.

Correct answer is C)

Sharpe Ratio for the fund = (19.5?2)/16 = 1.09 Sharpe Ratio for the benchmark = (17.5?2)/12 = 1.29

谢谢