Suppose you invest equally in Portfolio A and Portfolio C. What is the Sharpe ratio for the combined portfolio?
A) 0.431
B) 0.363
C) 0.420
D) 0.389

Question

Quizplus · Accepted Answer

To find the Sharpe ratio for the combined portfolio, we need to calculate the weighted average of the individual portfolios' Sharpe ratios, where the weight is equal for both portfolios since the investment is equal.

The Sharpe ratio for Portfolio A is given as 0.45 and for Portfolio C, it is 0.39. Thus, the weighted average of the two would be:

(0.5 * 0.45) + (0.5 * 0.39) = 0.42

Therefore, the answer is C) 0.420.

Suppose You Invest Equally in Portfolio a and Portfolio C