Question

1. Which of the following statements about portfolio return calculation is most accurate? Time-weighted returns are best for measuring the returns of a:

Group of answer choices

A. fund manager, whereas money-weighted returns are best for a portfolio owner.

B. portfolio owner, whereas money-weighted returns are best for a fund manager.

C.fund manager, whereas money-weighted returns are no longer used in practice.

D. portfolio owner, whereas money-weighted returns are generally used in practice.

2. Which of the following measures indicates the percentage of the variation in a portfolio's returns that is explained by variation in the market's returns?

Group of answer choices

A.Standard deviation

B. Coefficient of determination

C. Beta

D. Alpha

3. Relative to the Sharpe ratio, the Sortino ratio will make a portfolio’s performance look more favorable if the portfolio has experienced:

Group of answer choices

A. fewer extreme negative returns relative to extreme positive returns.

B. fewer extreme positive returns relative to extreme negative returns.

C. an equal number of extreme positive and extreme negative returns.

D. virtually no extreme negative or extreme positive returns.

Answer 1

1.Time weighted return are most accurate for judging the performance of a fund manager because he does not have any control over withdrawal of the funds by portfolio owners so it would be best to calculate his rate of return through time weighted method.

money weighted returns are best for portfolio owners as they look for appreciation in the capital and return on the capital so they would generally look to find their return through money weighted method.

All such other statements except statement (A) contradicts the major principles of time weighted return for fund manager and money weighted return for portfolio owners so they are false.

Correct answer would be option(A)