If The risk-free rate is 2 percent, the Sharpe ratio for a security that has an expected return of 5% and a standard deviation of returns of 4% is closest to:
A) 0.02
B) 0.04
C) 0.75
D) 1.00

Question

Quizplus · Accepted Answer

The Sharpe ratio is calculated as (Expected Return - Risk-Free Rate) / Standard Deviation of Returns. Plugging in the given values: (0.05 - 0.02) / 0.04 = 0.75.

If the Risk-Free Rate Is 2 Percent, the Sharpe Ratio