Quantitative Methods Q134
0. The table below shows information about three portfolios:
| Portfolio | Mean return onportfolio (%) | Standard deviation of the return on the portfolio (%) |
| A | 16 | 32 |
| B | 11 | 15 |
| C | 9 | 8 |
If the risk-free rate is 3%, which portfolio has the highest Sharpe ratio?
- Option : C
- Explanation : The Sharpe ratio is defined as Sp = (Rp- RF)/ p SA = (16 – 3)/32 = 0.40625 SB = (11 – 3)/15 = 0.6 SC = (9 – 3)/8 = 0.75
