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wariber [46]
3 years ago
12

Consider the following information: Portfolio Expected Return Standard Deviation Risk-free 7 % 0 % Market 12.2 31 A 11.0 20 a. C

alculate the Sharpe ratios for the market portfolio and portfolio A
Business
1 answer:
Gennadij [26K]3 years ago
7 0

Answer:

The Sharpe ratios for the market portfolio and portfolio A is 0.1677 and 0.2 respectively

Explanation:

The computation of the Sharpe ratio is shown below:

= (Expected Rate of Return - Risk-free rate of return) ÷ (Standard Deviation)

For Market portfolio, it would be

= (12.2% - 7%) ÷ (31%)

= 5.2% ÷ 31%

= 0.1677

For portfolio A, it would be

= (11% - 7%) ÷ (20%)

= 4% ÷ 20%

= 0.20

Simply we apply the Sharpe ratio formula in which the risk-free rate of return is deducted from the expected return and the same is divided by the Standard Deviation

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