Explanation

The Sharpe ratio is calculated using the formula:

$\text{Sharpe Ratio} = \frac{E(R_p) - R_f}{\sigma_p}$

Where:

• $E(R_p)$ = Expected return on the portfolio = 6.6%
• $R_f$ = Risk-free rate of return = 1.5%
• $\sigma_p$ = Volatility of returns on the portfolio = 13.1%

Substituting the values:

$\text{Sharpe Ratio} = \frac{6.6\% - 1.5\%}{13.1\%} = \frac{5.1\%}{13.1\%} = 0.389$

Therefore, the correct answer is C. 0.389.

Note: The beta value (1.4) is not needed for calculating the Sharpe ratio, as it measures systematic risk relative to a benchmark, while the Sharpe ratio uses total portfolio volatility.