Portfolio A has a return of 41% and a standard deviation of 25%.Portfolio B has a return of 21% and a standard deviation of 6%.If the risk-free rate is 4% portfolio,then the Sharpe indices of A and B are:

A) $ \mathrm{A}=1.5 ; \mathrm{B}=1.85 $
B) $ A=3.08 ; B=1.85 $
C) $ A=3.08 ; B=2.5 $
D) $ \mathrm{A}=4.51 ; \mathrm{B}=3.12 $

Question

Portfolio A has a return of 41% and a standard deviation of 25%.Portfolio B has a return of 21% and a standard deviation of 6%.If the risk-free rate is 4% portfolio,then the Sharpe indices of A and B are:

A) $ \mathrm{A}=1.5 ; \mathrm{B}=1.85 $
B) $ A=3.08 ; B=1.85 $
C) $ A=3.08 ; B=2.5 $
D) $ \mathrm{A}=4.51 ; \mathrm{B}=3.12 $

Quizplus · Accepted Answer

Using equation 20.11,we can compute the Sharpe indices of A and B as follows: A: (0.41 - 0.04)/0.25 = 3.08;B: (0.21 - 0.04)/0.06 = 1.85.

Portfolio a Has a Return of 41% and a Standard A=1.5;B=1.85 \mathrm{A}=1.5 ; \mathrm{B}=1.85 A=1.5;B=1.85

Portfolio a Has a Return of 41% and a Standard $\mathrm{A}=1.5 ; \mathrm{B}=1.85$