A portfolio manager is evaluating three different investment strategies labeled as Alpha, Beta, and Gamma. The returns and risks for these portfolios over a one-year period are as follows: Portfolio Alpha: Return = 15%, Standard Deviation = 10% Portfolio Beta: Return = 12%, Standard Deviation = 5% Portfolio Gamma: Return = 9%, Standard Deviation = 4% Additionally, the risk-free rate during this period is 3%. Using the Sharpe Ratio to assess the risk-adjusted performance of these portfolios, which portfolio has the highest Sharpe Ratio?

Exam

CFA Level 1

Section

Difficulty

Portfolio Management

Identifying Portfolio with Highest Sharpe Ratio

Very Hard Performance Evaluation Risk-adjusted Performance

A portfolio manager is evaluating three different investment strategies labeled as Alpha, Beta, and Gamma. The returns and risks for these portfolios over a one-year period are as follows:

Portfolio Alpha: Return = 15%, Standard Deviation = 10%
Portfolio Beta: Return = 12%, Standard Deviation = 5%
Portfolio Gamma: Return = 9%, Standard Deviation = 4%

Additionally, the risk-free rate during this period is 3%. Using the Sharpe Ratio to assess the risk-adjusted performance of these portfolios, which portfolio has the highest Sharpe Ratio?

Portfolio Alpha

Portfolio Beta

Portfolio Gamma

Hint

Submitted15.2K

Correct13.9K

% Correct91%