How is the Sharpe ratio defined as it applies to security returns?
A)Average return / Risk premium
B)Standard deviation / Risk premium
C)Average return / Standard deviation
D)Risk premium / Average return
E)Risk premium / Standard deviation

Question

Quizplus · Accepted Answer

The Sharpe ratio is defined as the risk premium (average return minus the risk-free rate) divided by the standard deviation of the return, which measures the risk-adjusted return of an investment.

How Is the Sharpe Ratio Defined as It Applies to Security