Q.206 A 10-year research on 3 distinct portfolios and the market reveals the following information: | Portfolio | Average Annual Return | Standard Deviation | Beta | |-----------|------------------------|--------------------|------| | 1 | 14% | 21 | 1.15 | | 2 | 16% | 24 | 1.00 | | 3 | 20% | 28 | 1.25 | | S&P 500 | 12% | 20 | | Given that the risk-free rate of return is 6%, use the Sharpe measure to rank the portfolios from the lowest to the highest. | Financial Risk Manager Part 1 Quiz - LeetQuiz

Explanation:

The formula for calculating the Sharpe ratio for a portfolio is: $S_p = \frac{E(R_p) - R_f}{\sigma_p}$

Hence, $S_1 = \frac{(14\% - 6\%)}{21\%} = 0.38$ $S_2 = \frac{(16\% - 6\%)}{24\%} = 0.42$ $S_3 = \frac{(20\% - 6\%)}{28\%} = 0.50$

Ranking from lowest to highest, we get 1, 2, 3.

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Q.206 A 10-year research on 3 distinct portfolios and the market reveals the following information:

Portfolio Average Annual Return Standard Deviation Beta
1 14% 21 1.15
2 16% 24 1.00
3 20% 28 1.25
S&P 500 12% 20

Given that the risk-free rate of return is 6%, use the Sharpe measure to rank the portfolios from the lowest to the highest.

Portfolio	Average Annual Return	Standard Deviation	Beta
1	14%	21	1.15
2	16%	24	1.00
3	20%	28	1.25
S&P 500	12%	20

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KKoray Nedim

Last updated: June 10, 2026 at 23:59

1, 3, 2

2, 3, 1

2, 1, 3

1, 2, 3

Financial Risk Manager Part 1

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