#1
Which of the following is NOT a measure of investment performance?
Pascal ratio
ExplanationPascal ratio is not a measure of investment performance.
#2
Which of the following is NOT a type of risk commonly associated with investments?
Inflation risk
ExplanationInflation risk is not commonly associated with investments.
#3
What does the Sharpe ratio measure?
Return per unit of risk
ExplanationThe Sharpe ratio measures return per unit of risk.
#4
Which of the following is true about alpha in investment performance measurement?
It measures the excess return of an investment relative to a benchmark
ExplanationAlpha measures the excess return of an investment relative to a benchmark.
#5
What does Value at Risk (VaR) measure?
The maximum potential loss of an investment
ExplanationVaR measures the maximum potential loss of an investment.
#6
What does the Treynor ratio measure?
Systematic risk per unit of market risk
ExplanationThe Treynor ratio measures systematic risk per unit of market risk.
#7
Which of the following statements about standard deviation is true in the context of investment risk analysis?
Standard deviation measures the dispersion of investment returns around the mean return.
ExplanationStandard deviation measures the dispersion of investment returns around the mean return.
#8
What is the formula for calculating the Sharpe ratio?
Sharpe ratio = (Investment return - Risk-free rate) / Volatility
ExplanationThe Sharpe ratio formula is (Investment return - Risk-free rate) / Volatility.
#9
Which of the following measures considers only the downside risk in its calculation?
Sortino ratio
ExplanationThe Sortino ratio considers only downside risk in its calculation.
#10
What is the primary limitation of using the Sharpe ratio as an investment performance measure?
It assumes a normal distribution of returns.
ExplanationThe primary limitation of the Sharpe ratio is its assumption of a normal distribution of returns.
#11
What does the Information Ratio measure in investment performance analysis?
The ratio of active return to tracking error
ExplanationThe Information Ratio measures the ratio of active return to tracking error.
#12
What is the main drawback of using the Treynor ratio as a performance measure?
It does not consider the investment's risk-adjusted return.
ExplanationThe main drawback of the Treynor ratio is its lack of consideration for the investment's risk-adjusted return.