Chartered Investment Manager (CIM) Practice Exam · Question
Which risk-adjusted return measure primarily uses standard deviation as its measure of total risk?
The Sharpe Ratio measures the excess return per unit of total risk, where total risk is represented by the standard deviation of returns.
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Question: Which risk-adjusted return measure primarily uses standard deviation as its measure of total risk?
Answer options: ✅ Sharpe Ratio.
- Treynor Ratio.
- Jensen's Alpha.
- Information Ratio.
Correct answer: Sharpe Ratio.
Explanation: The Sharpe Ratio measures the excess return per unit of total risk, where total risk is represented by the standard deviation of returns.
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