USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Consider the following information for four portfolios, the market, and the risk-free rate (RFR):

-Refer to Exhibit 18.6. Calculate the Sharpe Measure for each portfolio.
A) A1 = 0.40, A2 = 0.31, A3 = 0.65, A4 = 0.66
B) A1 = 0.31, A2 = 0.66, A3 = 0.65, A4 = 0.40
C) A1 = 0.66, A2 = 0.65, A3 = 0.31, A4 = 0.40
D) A1 = 0.66, A2 = 0.31, A3 = 0.65, A4 = 0.40
E) A1 = 0.54, A2 = 0.68, A3 = 0.65, A4 = 0.40

Question

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Consider the following information for four portfolios, the market, and the risk-free rate (RFR):
 
-Refer to Exhibit 18.6. Calculate the Sharpe Measure for each portfolio.
A) A1 = 0.40, A2 = 0.31, A3 = 0.65, A4 = 0.66 
B) A1 = 0.31, A2 = 0.66, A3 = 0.65, A4 = 0.40 
C) A1 = 0.66, A2 = 0.65, A3 = 0.31, A4 = 0.40 
D) A1 = 0.66, A2 = 0.31, A3 = 0.65, A4 = 0.40 
E) A1 = 0.54, A2 = 0.68, A3 = 0.65, A4 = 0.40

Quizplus · Accepted Answer

The Sharpe Ratio is calculated by subtracting the risk-free rate from the return of the portfolio and then dividing by the standard deviation of the portfolio's excess return. Without the specific data from Exhibit 18.6, the correct answer cannot be determined directly. However, the Sharpe Ratio is a measure of risk-adjusted return, and the correct set of Sharpe Ratios would depend on the specific returns, risk-free rates, and standard deviations provided in the exhibit. Given the format of the question, it seems it's asking for the identification of a plausible set of Sharpe Ratios rather than a calculation from raw data. The choice provided here (D) is selected based on the assumption that it was identified as the correct answer based on the specific data in Exhibit 18.6, which is not provided in the question.