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The MD Fund has an expected return of 16% and a standard deviation of 20%. The risk-free rate is 4%. What is the reward-to-volatility (Sharpe) ratio for the MD Fund

Respuesta :

Parrain

Answer: 60% or 0.60

Explanation:

Sharpe ratio shows the risk adjusted return of an asset and then compares it to a risk-free asset to see if its returns are higher after it has been adjusted for risk.

Formula is:

= (Expected return - Risk free rate) / Standard deviation

= (16% - 4%) / 20%

= 12% / 20%

= 60% or 0.60

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