Answer: 28%

**Explanation:** The relationship between a stock's Sharpe ratio and the market's Sharpe ratio is given by: \[ \text{Stock Sharpe Ratio} = \rho \times \text{Market Sharpe Ratio} \] Where: - ρ = correlation between the stock and market portfolio - Market Sharpe Ratio = 40% = 0.40 - ρ = 0.7 \[ \text{Stock Sharpe Ratio} = 0.7 \times 0.40 = 0.28 = 28\% \] Therefore, the stock's Sharpe ratio is **28%** (Option B).

Author: LeetQuiz .