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4 June, 04:13

A portfolio with a 25% standard deviation generated a return of 15% last year when T-bills were paying 4.5%. This portfolio had a Sharpe ratio (E (r_p) - r_L/sigma_P) of __

a. 0 65

b. 0.50

c. 0.42

d. 0.35

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  1. 4 June, 07:54
    0
    c. 0.42

    Explanation:

    The formula and the computation of the sharpe ratio is shown below:

    = (Generated yearly return - T-bill) : (standard deviation)

    = (0.15 - 0.045) : (0.25)

    = (0.105) : (0.25)

    = 0.42

    We simply deduct the T-bill from the yearly return generated and then divided it by the standard deviation so that the ratio can be achieved
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