Question

o o Exhibit 18.2 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM o o The portfolios identified below are being considered
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Answer #1

Select - (b) ....... Y

Explanation

Sharpe measure = ( Ri - Rf ) / σ

Where ........ Ri = Portfolio return and Rf = Risk free rate

σ = Standard deviation (or) Total risk of the portfolio

W = (0.18 - 0.04 ) / 0.06 = 2.33

X = (0.21 - 0.04) / 0.10 = 1.70

Y = (0.13 - 0.04) / 0.03 = 3

Z = (0.16 - 0.04) / 0.07 = 1.71

Portfolio - Y having highest Sharpe ratio is the best

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