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CFA Institute Exam CFA-Level-III Topic 1 Question 3 Discussion

Actual exam question for CFA Institute's CFA Level III Chartered Financial Analyst exam
Question #: 3
Topic #: 1
[All CFA Level III Chartered Financial Analyst Questions]

HAS THREE PARTS One year has passed since HNW Advisors first started operations. Their overall equity portfolio has returned 28.2% versus a return of 22.4% for the S&P 500. The standard deviation of the S&P 500 is 20%, and Maggie Day, CFA, has estimated the standard deviation of HNW Advisor's equity portfolio at 45%. HNW Advisor's equity portfolio has a beta of 1.35, and the risk-free rate is 4.4%. A major HNW client is attempting to evaluate the relative performance of HNW's equity fund. The client is unsure whether the Sharpe measure or the Treynor measure is appropriate for the HNW portfolio.

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Suggested Answer: B

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