Quantitative Methods Flashcards
A portfolio has an expected return of 12% and a standard deviation of 15%. What is the portfolio’s coefficient of variation?
A. 0.83
B. 1.25
C. 1.87
D. 2.50
B - 1.25
The coefficient of variation is calculated by dividing the standard deviation by the expected return
CofV = 15% / 12%
1.25
What is the difference between a sample and a population?
A sample is a smaller representative group taken from a larger population. Analysis of a sample can be used to make inferences about the entire population
What are common measures of dispersion?
Measures of dispersion quantify the spread or variability of data. Stand Deviation and Range are common measures
A portfolio manager has an expected return of 10% and a standard deviation of 15%. The risk-free rate is 2%. What is the portfolio’s Sharpe Ratio?
The Sharpe Ratio is calculated as:
(Portfolio Return - Risk-Free Rate) / Standard Deviation
Therefore,
(10% - 2%) / 15% = 0.53
What statistical measure is most appropriate for describing central tendency of a dataset with extreme outliers?
The median is the most appropriate because it is not influenced by extreme values. The mean is sensitive to outliers while the mode and standard deviation describe frequency and dispersion
What is not a measure of dispersion?
A. Variance
B. Standard Deviation
C. Mean
D. Range
E. Interquartile Range
C - Mean
The mean is a measure of central tendency, indicating the average value of a dataset. Dispersion measures, such as variance, standard deviation, range, and interquartile range, describe the spread or variability of data points around central tendency
A portfolio has an expected return of 12% and a standard deviation of 18%. The risk-free rate is 3%. What is the portfolio’s Sharpe Ratio?
(12% -3%) / 18%
(0.12 - 0.03) / 0.18 = 0.50
