Sharpe's performance measure divides the portfolio's risk premium by the
A) standard deviation of the rate of return.
B) variance of the rate of return.
C) slope of the fund's characteristic line.
D) beta.
E) risk-free rate.

Question

Quizplus · Accepted Answer

Sharpe's performance measure calculates the excess return of a portfolio (portfolio return - risk-free rate) and divides it by the standard deviation of the portfolio's return. This provides a measure of the amount of return achieved per unit of risk taken.

Sharpe's Performance Measure Divides the Portfolio's Risk Premium by the