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?
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?
I’d be careful asking such questions.
#justsaying
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.
What reading is this?
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)
You just figured out that you’re not from North Korea?
Silly you hehe