You are given a risk-free rate of 7% per year, a portfolio return of 19% per year, and a standard deviation of portfolio return of 12% per year. What is the Sharpe measure of risk-adjusted performance?
Answer(s): C
The Sharpe measure of risk-adjusted performance is equal to (rbar_p - rbar_f)/sigma_p, where rbar_p is the mean portfolio return, rbar_f is the mean risk-free return, and sigma_p is the standard deviation of portfolio return. In our case, we have (19% - 7%) / 12% = 12/12 = 1.000.
A normal distribution has a mean of 4.1 and a standard deviation of 2.3. The probability that a value from this distribution will be negative equals ________.
Answer(s): B
The z-value of a selected observation, X, from a normal distribution with mean M and standard deviation S equals z = (X-M)/S. in the present case, the z-value of X = 0 equals -4.1/2.3 = -1.78. Then, the probability that a number Y is negative is the same as the probability of a z-value less than -1.78. Using the Normal probability tables to get P(z < -1.78) is tricky because the table given in the assigned text is only for positive values. To calculate the probability, use the fact that the standard normal distribution is symmetrical about zero. Hence, P(z < -1.78) = P(z > + 1.78) = 1.0 - 0.9625 = 0.0375.
A study of the opinion of designers with respect to the primary color most desirable for use in executive offices showed that:Primary Color Number of OpinionsRed 92Orange 86Yellow 46Green 91Blue 37Indigo 46Violet 2What is the probability that a designer does not prefer blue?
P(Blue) = 37/400. P(not blue) = 1 - 37/400 = 0.9075.
If you deposit $2,345 into an account paying 6.5% per year simple interest, how much interest will be earned after 8 months?
Answer(s): A
The question only asks for the earned interest, not the total amount in the account. On the BAII Plus, press 2345 x 0.065 x 8 divide 12 = to see the answer. On the HP12C, press 2345 ENTER 0.065 x 8 x 12 divide to see the answer.
If you deposit $1,400 today into a savings account paying 8% per year, compounded semiannually, how much is in your account in 5 years?
On the BAII Plus, press 10 N, 8 divide 2 = I/Y, 1400 PV, 0 PMT, CPT FV. On the HP12C, press 10 n, 8 ENTER 2 divide i, 1400 PV, 0 PMT, FV. Note that the answer will be displayed as a negative number. Make sure the BAII Plus has the P/Y value set to 1.
Post your Comments and Discuss CFA CFA I exam prep with other Community members:
Our website is free, but we have to fight against AI bots and content theft. We're sorry for the inconvenience caused by these security measures. You can access the rest of the CFA I content, but please register or login to continue.