Sharpe's performance measure divides the portfolio's risk premium by the
A) Standard deviation of the rate of return.
B) Variance of the rate of return.
C) Slope of the fund's characteristic line.
D) Beta.
E) Risk free rate.

Question

Quizplus · Accepted Answer

The Sharpe ratio measures the risk-adjusted return of a portfolio by dividing the portfolio's excess return (risk premium) by the standard deviation of the portfolio's returns, which represents total risk.

Sharpe's Performance Measure Divides the Portfolio's Risk Premium by the