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Calculate the Sharpe ratio for a portfolio with a return of 10% and a standard deviation of 1
Calculate the Sharpe ratio for a portfolio with a return of 10% and a standard deviation of 1.2 during a period in which the risk free rate is 4%.
a.5.0
b.6.0
c.6.2
d.8.8
Expert Solution
Computation of Sharp Ratio for Portfolio:
Sharp Ratio = (Portfolio Return - Risk-free Rate)/Standard Deviation
= (10% - 4%)/1.2
= 6%/1.2
Sharp Ratio = 5.0
So, the correct option is A "5.0".
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