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vampirchik [111]
2 years ago
9

If a portfolio had a return of 8%, the risk-free asset return was 3%, and the standard deviation of the portfolio's excess retur

ns was 20%, the Sharpe measure would be
Business
1 answer:
atroni [7]2 years ago
5 0

Answer: 25%

Explanation:

The Sharpe Ratio will be calculated by using the formula:

= (​Rp​−Rf)/σp

​​where,

Rp ​= return of portfolio = 0.08

Rf​ = risk-free rate = 0.03

σp​ = standard deviation of portfolio’s excess return​ = 0.20

Therefore, Sharpe Ratio will be:

= (​Rp​−Rf)/σp

= (0.08 - 0.03)/0.20

= 0.05/0.20

= 0.25 or 25%

The Sharpe ratio is 25%.

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