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How do you when a pf is optimal?

So I am going through the Practice Problems in the CFAI now and in the process, I had a question on Optimal pf when calculating Excess Return over MTCR.

One of the item set’s answer mentioned that since the pf is an optimal portfolio, Excess Return over MTCR’s formula is equivalent to a Sharpe Ratio. (Essentially replacing MTCR with std dev of pf)

Exhibits nor the item set mentions anything about pf being optimal. Any thoughts?

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It is optimal. The text shows that when all the asset classes have the same Excess Return to MTCR (aka Sharpe Ratio), it is optimal. 

The calculation is: (Rp-Rf) / MCTR

By the way, are you really in North Korea? Where do you take the test?

125mph wrote:

By the way, are you really in North Korea? Where do you take the test?

I’d be careful asking such questions.

#justsaying

¯\_(ツ)_/¯ It be like that sometimes.

Hey, I could have asked about Russia!

Hey guys chill. Don’t have to be worried about that. Or not? Haha.. I’m from South Korea not North Korea.

Just figured it out. Blaming my tired day at work. 

teddybk wrote:
So I am going through the Practice Problems in the CFAI now and in the process, I had a question on Optimal pf when calculating Excess Return over MTCR.

One of the item set’s answer mentioned that since the pf is an optimal portfolio, Excess Return over MTCR’s formula is equivalent to a Sharpe Ratio. (Essentially replacing MTCR with std dev of pf)

Exhibits nor the item set mentions anything about pf being optimal. Any thoughts?

What reading is this?

Simplify the complicated side; don't complify the simplicated side.

Financial Exam Help 123: The place to get help for the CFA® exams
http://financialexamhelp123.com/

Hi, S2000magician. This was from the CFAI question book. (Review Category Asset Allocation and Related Decisions in Portfolio Management (1), Tina Swan Case Scenario, Question 17)

teddybk wrote:
I’m from South Korea not North Korea.

Just figured it out.

You just figured out that you’re not from North Korea?

wink

Simplify the complicated side; don't complify the simplicated side.

Financial Exam Help 123: The place to get help for the CFA® exams
http://financialexamhelp123.com/

laugh Silly you hehe