A portfolio has a variance of .017424, a beta of 1.06, and an expected return of 13.15 percent. What is the Sharpe ratio if the expected risk-free rate is 3.4 percent?
A) .66
B) .70
C) .74
D) .82
E) .86

Question

Quizplus · Accepted Answer

The Sharpe ratio is calculated as (Expected Return - Risk-Free Rate) / Standard Deviation. The standard deviation is the square root of the variance, which is √0.017424 = 0.132. The Sharpe ratio is (13.15% - 3.4%) / 0.132 = 0.737, which rounds to 0.74.

A Portfolio Has a Variance of