CFA Practice Question

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CFA Practice Question

The mean return in 2011 for a stock mutual fund of midsize companies was 5.3% and the mean return for a risk-free bond was 1.0%. If the Sharpe measure for the mutual fund is 2, what is the standard deviation of the stock mutual fund?

A. 2.15
B. 3.15
C. 4.34
Correct Answer: A

Sharpe measure = (portfolio mean return - risk-free mean return)/ standard deviation of the portfolio

User Contributed Comments 5

User Comment
TammTamm When in doubt, plug each answer into the formula until you get the correct answer.


A. 5.3-1/2.15=2
B. 5.3-1/3.15=1.365
C. 5.3-1/4.34=.9907
D. 5.3-1/6.37=.675

The answer is A. Just a note to help.
Meka76 It would also be good to know how to convert any formula:

Sharpe Ratio=(Rp-Rf)/portfolio standard deviation

Portfolio standard deviation = (Rp-Rf)/Sharpe ratio
RCapistrano Set up the equation and solve for the unknown "x".

x = 4.3/2
x = 2.15
2014 after u minus return - risk
u look at possible answers givn in question and just select
davidt87 2.15*%*
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