Use the following information to answer the question(s)below. The volatility of the market portfolio is 10%,the expected return on the market is 12%,and the risk-free rate of interest is 4%.
-The Sharpe Ratio for Rearden Metal is closest to:
A)0.40.
B)0.56.
C)0.80.
D)1.00.

Question

Use the following information to answer the question(s)below.  The volatility of the market portfolio is 10%,the expected return on the market is 12%,and the risk-free rate of interest is 4%.
-The Sharpe Ratio for Rearden Metal is closest to:
A)0.40. 
B)0.56. 
C)0.80. 
D)1.00.

Quizplus · Accepted Answer

The Sharpe Ratio is calculated as the excess return divided by the standard deviation of the excess return. The excess return is the return on the asset minus the risk-free rate. The standard deviation of the excess return is a measure of the volatility of the asset's return. The Sharpe Ratio for Rearden Metal is 0.40, which is the closest to choice A.

Use the Following Information to Answer the Question(s)below