Use the following information to answer the question(s)below.
Suppose that all stocks can be grouped into two mutually exclusive portfolios (with each stock appearing in only one portfolio): growth stocks and value stocks.Assume that these two portfolios are equal in size (market value),the correlation of their returns is equal to 0.6,and the portfolios have the following characteristics: The risk-free rate is 3.5%.
-The Sharpe ratio for the value stock portfolio is closest to:
A).53.
B).58.
C).61.
D).79.

Question

Use the following information to answer the question(s)below.
Suppose that all stocks can be grouped into two mutually exclusive portfolios (with each stock appearing in only one portfolio): growth stocks and value stocks.Assume that these two portfolios are equal in size (market value),the correlation of their returns is equal to 0.6,and the portfolios have the following characteristics:  The risk-free rate is 3.5%.
-The Sharpe ratio for the value stock portfolio is closest to:
A).53. 
B).58. 
C).61. 
D).79.

Quizplus · Accepted Answer

The Sharpe ratio is calculated as the difference between the portfolio return and the risk-free rate, divided by the portfolio's standard deviation. The closest value given in the options is .61.

Use the Following Information to Answer the Question(s)below