A reward-to-volatility ratio is useful in
A) measuring the standard deviation of returns.
B) understanding how returns increase relative to risk increases.
C) analyzing returns on variable-rate bonds.
D) assessing the effects of inflation.
E) None of the options are correct.

Question

Quizplus · Accepted Answer

The reward-to-volatility ratio, often exemplified by the Sharpe Ratio, is useful in understanding how returns increase relative to risk increases. It measures the excess return (over a risk-free rate) per unit of volatility or risk, providing a means to compare the performance of different investments.

A Reward-To-Volatility Ratio Is Useful in