IFC Chapter 14 - Understanding Mutual
Fund Performance questions with
answers.
How to calculate the return on a mutual fund? ANS -(NAVPS end - NAVPS beg)/NAVPS beg
What is the Sharpe ratio and what does it measure? ANS -The sharpe ratio compares the excess return
of the portfolio to the portfolio's standard deviation, therefore taking the portfolio's risk into account.
How do you calculate the sharpe ratio? ANS -[Return on the portfolio - Risk-free rate (the average of
the three month treasury bill rate over the period being measured)]/the standard deviation
What types of results best measure management's ability to manage a portfolio in all phases of business
cycles? ANS -long term
Performance assessment can be measured in two ways. What are they? ANS -Using Benchmark indices
and comparison universes
Benchmark indices are indices that reflect a mutual fund's investment _________________ and can be
used as standards against which ___________________ can be measured ANS -universe; performance
All mutual funds have a benchmark index. What are some Canadian examples? ANS -S&P/TSX
Composite for Canadian equity funds
S&P/TSX 60 for Canadian large-cap equity funds
S&P 500 for U.S. equity funds
MSCI EAFE Index for non-north american equity funds
Fund Performance questions with
answers.
How to calculate the return on a mutual fund? ANS -(NAVPS end - NAVPS beg)/NAVPS beg
What is the Sharpe ratio and what does it measure? ANS -The sharpe ratio compares the excess return
of the portfolio to the portfolio's standard deviation, therefore taking the portfolio's risk into account.
How do you calculate the sharpe ratio? ANS -[Return on the portfolio - Risk-free rate (the average of
the three month treasury bill rate over the period being measured)]/the standard deviation
What types of results best measure management's ability to manage a portfolio in all phases of business
cycles? ANS -long term
Performance assessment can be measured in two ways. What are they? ANS -Using Benchmark indices
and comparison universes
Benchmark indices are indices that reflect a mutual fund's investment _________________ and can be
used as standards against which ___________________ can be measured ANS -universe; performance
All mutual funds have a benchmark index. What are some Canadian examples? ANS -S&P/TSX
Composite for Canadian equity funds
S&P/TSX 60 for Canadian large-cap equity funds
S&P 500 for U.S. equity funds
MSCI EAFE Index for non-north american equity funds
