The Sharpe performance measure is:
A) the total return on the investment.
B) the premium earned above the risk-free rate divided by the standard deviation of return on the security.
C) the standard deviation of return on the security divided by the return on the security.
D) the return of the security divided by the standard deviation of return on the security.

Question

Quizplus · Accepted Answer

The Sharpe performance measure is defined as the premium earned above the risk-free rate divided by the standard deviation of return on the security. This ratio helps investors understand the return of an investment compared to its risk.

The Sharpe Performance Measure Is