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**Question 62** For the past four years, the returns on a portfolio were 6%, 9%, 4%, and 12%. The corresponding returns of the benchmark were 7%, 10%, 4%, and 14%. The risk-free rate of return is 7%, and the downside deviation is 1.58%. The portfolio's Sortino ratio is closest to: | Financial Risk Manager Part 1 Quiz - LeetQuiz

Explanation:

The benchmark returns are not important here. The average of the portfolio returns is $(6 + 9 + 4 + 12) / 4 = 31 / 4 = 7.75$ .

Sortino ratio = $\frac{E(R_P) - R_{\text{min}}}{\text{Downside Deviation}} = \frac{7.75 - 7}{1.58} = 0.4747$

Note: If the minimum acceptable return is not provided, it is reasonable to use the risk-free rate instead.

(Book 1, Module 5.3, LO 5.g)

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Question 62
For the past four years, the returns on a portfolio were 6%, 9%, 4%, and 12%. The corresponding returns of the benchmark were 7%, 10%, 4%, and 14%. The risk-free rate of return is 7%, and the downside deviation is 1.58%. The portfolio's Sortino ratio is closest to:

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Financial Risk Manager Part 1

Get started today

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Get started today

Question 62 For the past four years, the returns on a portfolio were 6%, 9%, 4%, and 12%. The corresponding returns of the benchmark were 7%, 10%, 4%, and 14%. The risk-free rate of return is 7%, and the downside deviation is 1.58%. The portfolio's Sortino ratio is closest to:

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Question 62
For the past four years, the returns on a portfolio were 6%, 9%, 4%, and 12%. The corresponding returns of the benchmark were 7%, 10%, 4%, and 14%. The risk-free rate of return is 7%, and the downside deviation is 1.58%. The portfolio's Sortino ratio is closest to: