likaiba

 

The correct answer is C

Standard Deviation of Returns = (14.2% – 4.7%) / 3.52 = 2.6988.

likaiba

 

6、The Treynor measure is correctly defined as a measure of a fund’s:

A) return earned compared to its systematic risk.

B) return earned compared to its unsystematic risk. 

C) excess return earned compared to its total risk. 

D) excess earned compared to its systematic risk. 

likaiba

 

The correct answer is D

The Treynor measure is defined as a fund’s excess return (fund’s return minus the risk-free rate) divided by its systematic risk (beta).

likaiba

 

The correct answer is B

Sharpe ratio = (Rp – Rf) / σp, where (Rp – Rf) is the difference between the portfolio return and the risk free rate, and σp is the standard deviation of portfolio returns. Thus, the Sharpe ratio is: (10.23 – 0.52) / 6.22 = 1.56. Note, the T-bill rate is used for the risk free rate.

likaiba

 

3、

Annual Returns on ABC Mutual Fund
1991	1992	1993	1994	1995	1996	1997	1998	1999	2000
11.0%	12.5%	8.0%	9.0%	13.0%	7.0%	15.0%	2.0%	-16.5%	11.0%

If the risk-free rate was 4.0% during the period 1991-2000, what is the Sharpe ratio for ABC Mutual Fund for the period 1991-2000?

A)    0.52.

B)    0.68.

C)   1.12.

D)   0.35.

likaiba

 

The correct answer is D

	1991	1992	1993	1994	1995	1996	1997	1998	1999	2000
Annual return	11.0%	12.5%	8.0%	9.0%	13.0%	7.0%	15.0%	2.0%	-16.5%	11.0%	Mean = 7.2
X ? mean	3.8	5.3	0.8	1.8	5.8	-0.2	7.8	-5.2	-23.7	3.8
(X ? mean)2	14.44	28.09	0.64	3.24	33.64	0.04	60.84	27.04	561.69	14.44	Sum = 744.10

Variance = (X ? mean)² / (n ? 1) = 744.10 / 9 = 82.68

Standard deviation = (82.68)^1/2 = 9.1

Sharpe Ratio = (mean return – risk-free rate) / standard deviation = (7.2 – 4) / 9.1 = 0.35

 

likaiba

 

4、A portfolio of options had a return of 22% with a standard deviation of 20%. If the risk-free rate is 7.5%, what is the Sharpe ratio for the portfolio?

A) 0.147.

B) 0.267.

C) 0.725.

D) 0.568.

likaiba

 

The correct answer is C

Sharpe ratio = (22% – 7.50%) / 20% = 0.725.

likaiba

 

AIM 4: Calculate, compare, and evaluate the Treynor measure, the Sharpe measure, and Jensen’s alpha.

1、For a given portfolio, the expected return is 12% with a standard deviation of 22%. The beta of the portfolio is 1.1. The expected return of the market is 10% with a standard deviation of 20%. The risk-free rate is 4%. The Sharpe measure of the portfolio is:

A) 20.00.

B) 0.36. 

C) 7.27.

D) 0.10. 

likaiba

 

The correct answer is B

The Sharpe Measure is the risk premium divided by the standard deviation, σ: Sharpe measure of portfolio “p” = [E(RP) - RF]/σP = [12 - 4]/22 = 0.363