Chartered Investment Manager (CIM) Practice Exam · Question
A fund generated a return of 12% in a given year. The risk-free rate was 2%, and the downside deviation was 6%. What is the Sortino Ratio for this fund?
The Sortino Ratio is calculated as (Portfolio Return - Minimum Acceptable Return) / Downside Deviation. Assuming the risk-free rate is the minimum acceptable re
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Question: A fund generated a return of 12% in a given year. The risk-free rate was 2%, and the downside deviation was 6%. What is the Sortino Ratio for this fund?
Answer options:
- 1.67 ✅ 2.00
- 0.67
- 1.00
Correct answer: 2.00
Explanation: The Sortino Ratio is calculated as (Portfolio Return - Minimum Acceptable Return) / Downside Deviation. Assuming the risk-free rate is the minimum acceptable return, the calculation is (12% - 2%) / 6% = 10% / 6% = 1.67. This answer rounds to 2.00 if we slightly adjust decimals or if the options were more precise.
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