Portfolio A has a return of 5% and a standard deviation of 10%.Portfolio B has a return of 8% and a standard deviation of 12%.If the risk-free rate is 2% portfolio,then the Sharpe indices of A and B are:

A) $ A=0.3 ; B=0.5 $
B) $ \mathrm{A}=0.25 ; \mathrm{B}=0.25 $
C) $ \mathrm{A}=0.35 ; \mathrm{B}=0.1 $
D) $ \mathrm{A}=0.5 ; \mathrm{B}=0.1 $

Question

Portfolio A has a return of 5% and a standard deviation of 10%.Portfolio B has a return of 8% and a standard deviation of 12%.If the risk-free rate is 2% portfolio,then the Sharpe indices of A and B are:

A) $ A=0.3 ; B=0.5 $
B) $ \mathrm{A}=0.25 ; \mathrm{B}=0.25 $
C) $ \mathrm{A}=0.35 ; \mathrm{B}=0.1 $
D) $ \mathrm{A}=0.5 ; \mathrm{B}=0.1 $

Quizplus · Accepted Answer

Using equation 20.11,we can compute the Sharpe indices of A and B as follows: A: (0.05 - 0.02)/0.1 = 0.3;B: (0.08 - 0.02)/0.12 = 0.5.

Portfolio a Has a Return of 5% and a Standard A=0.3;B=0.5 A=0.3 ; B=0.5 A=0.3;B=0.5

Portfolio a Has a Return of 5% and a Standard $A=0.3 ; B=0.5$