If a portfolio had a return of 12%, the risk-free asset return was 4%, and the standard deviation of the portfolio's excess returns was 25%, the Sharpe measure would be
A)0.12.
B)0.04.
C)0.32.
D)0.16.

Question

Quizplus · Accepted Answer

The Sharpe measure is calculated by dividing the excess return of the portfolio by the standard deviation of the portfolio's excess returns. 
Sharpe measure = (Rp - Rf) / σp 
Rp = Portfolio return = 12% 
Rf = Risk-free asset return = 4% 
σp = Standard deviation of portfolio's excess returns = 25% 
Sharpe measure = (12% - 4%) / 25% = 0.32

If a Portfolio Had a Return of 12%, the Risk-Free