Wealth-Forum e-zine

Test your understanding of this topic

Q1.

Funds A and B have information ratio of 2 and 2.5 respectively. Sharpe ratio for both the funds is 5. An investor seeking risk adjusted alpha returns would pick:

(a) Fund A

(b) Fund B

Q2.

An investor believes that market is bullish in the near term and wants to derive excess returns. The fund recommended to the investor would be:

(a) Fund A with a Treynor ratio of 13

(b) Fund B with a Treynor ratio of 15

Q3.

An investor is considering an investment in biotechnology sector funds. The ratio that he should analyse is:

(a) Sharpe Ratio

(b) Treynor ratio

Q4.

An investor seeks a fund with high returns and low volatility. Fund A and B have Sharpe ratios of 5 and 3 respectively. Treynor ratio for Fund A is 11 and for fund B is 12. The fund that should be recommended to the investor:

(a) Fund A

(b) Fund B

Q5.

A very skilled top management executive of a company suddenly dies in an accident. The risk that the company faces is:

(a) Systematic risk

(b) Unsystematic risk