
Explanation:
Recall that the Sharpe ratio is given as:
, ,
Therefore:
A ratio of 1.0667 implies that the investor earns approx. 1.07 per unit of risk.
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Q.3021 James Dunn is a retail investor who expects his stock portfolio to return 21.2% in the following year. If the returns on risk-free Treasury notes are 11.6%, and the portfolio carries a standard deviation of 0.09, then which of the following is closest to the Sharpe ratio of Dunn’s portfolio?
A
1.5403
B
2.9873
C
1.0667
D
2.4543
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