Finance Junkie
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Postby » Tue Oct 08, 2013 5:25 am

Last 4 years, the returns on a portfolio were 6%, 9%, 4%, & 12%. The returns of the benchmark were 7%, 10%, 4%, & 10%. The minimum acceptable return is 7%. What is the portfolio's Sortino ratio?
Choose one answer.
a. 0.4743 Correct
b. 0.4911 Incorrect
c. 0.4234 Incorrect
d. 0.5623 Incorrect
The correct answer is 0.4743.

How to calculate this?

Finance Junkie
Posts: 258
Joined: Thu Sep 20, 2012 3:42 pm


Postby pradeeppdy » Tue Oct 08, 2013 10:49 am

Sortino ratio = R-T/DR

R= 6%+9%+4%+12%/4 = 7.75%
T = 7%(Given)
DR = [(1%)^2 + (3%)^2]^.5/4 = 1.5811

Then we put all values in formula given for sortino ratio.
S = R-T/DR
= 7.75% - 7%/ 1.5811 = .4744( Which is nearby .4743)

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Joined: Sat Nov 02, 2013 9:48 am

Postby harshdeepsingh » Wed Nov 06, 2013 8:59 pm

Could you please explain why did you raise the equation to .5/4 in the DR calculation?

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