You are analyzing an investment opportunity and collecting three returns from the past 3 years: 0.34%, 18.64%, -3.14%. Risk free rate is 0.8% (=0.0080). What is the downside risk?
Please round your answer to the fourth decimal. For example, 0.1234.
Computation of Downside Risk
We have given the returns for the past three years for an investment as:
0.34% , 18.64% , -3.14%
Also, we have been given the Risk Free Rate as 0.8%
Thus, In order to calculate the downside risk, we have to consider the returns which are below the risk free rate of 0.8% ie.: 0.34%, -3.14%
We will calculate the standard deviation of the 0.34% & -3.14%
Downside risk is +2.46%
Get Answers For Free
Most questions answered within 1 hours.