The _________ reward-to-variability (Sharpe Ratio) ratio is found on the capital market line, which is the...
The _________ reward-to-variability (Sharpe Ratio) ratio is found on the capital market line, which is the ________ capital allocation line.
highest; flattest
lowest; flattest
highest; steepest
lowest; steepest
Homework Answers
Answer: The correct option is: "highest and steepest".
The highest reward-to-variability (Sharpe Ratio) ratio is found on the capital market line, which is the steepest capital allocation line.
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The _________ reward-to-variability (Sharpe Ratio) ratio is
found on the capital market line, which is the...
A stock has a correlation with the market of 0.4. If the Sharpe ratio of the...
A stock has a correlation with the market of 0.4. If the Sharpe ratio of the market portfolio is 0.7, what is the Sharpe ratio of the stock? (Hint: algebraically manipulate the SML equation.) A. 0.28 B. 0.75 C. 0.60 D. 0.55
AAPL has a Sharpe ratio of 2.5. GM has a Sharpe ratio of 1.2. Which of...
AAPL has a Sharpe ratio of 2.5. GM has a Sharpe ratio of 1.2. Which of the following statements is most correct? Group of answer choices GM's returns are 1.2% above the index, while AAPL's returns are 2.5% above the index. AAPL has higher returns than GM. GM has higher returns than AAPL. AAPL has higher returns given the level of risk (or higher returns per unit of risk).
Suppose you estimated the following data for funds GMO and OMG. The correlation coefficient between them...
Suppose you estimated the following data for funds GMO and OMG. The correlation coefficient between them is 0.35. The risk-free rate is 5%. E(R) ? GMO 19% 29% OMG 8% 15% a.) Mango fund invests 45% in GMO and the remaining in OMG. What are the E(R), ?, and Sharpe ratio of Mango? b.) Among all possible portfolios formed from GMO and OMG funds, Mingo has the lowest variance. What are the E(R), ?, and Sharpe ratio of Mingo? c.)...
Given the information in the table, which of the following statements is CORRECT? Stock A Stock...
Given the information in the table, which of the following statements is CORRECT? Stock A Stock B Stock C Coefficient of Variation 7.80 2.00 2.33 Sharp Ratio 0.05 0.38 0.32 A. Stock A has the least stand-alone risk because it has the lowest Sharpe ratio and the highest coefficient of variation B. Stock B has the least stand-alone risk because it has the highest Sharpe ratio and the lowest coefficient of variation.A. Stock A has the least stand-alone risk because...
3. Which of the following statements are true? Please Explain. a. A lower allocation to the...
3. Which of the following statements are true? Please Explain. a. A lower allocation to the risky portfolio reduces the Sharpe (reward-to-volatility) ratio. b. The higher the borrowing rate, the lower the Sharpe ratios of levered portfolios. c. With a fixed risk-free rate, doubling the expected return and standard deviation of the risky portfolio will double the Sharpe ratio. d. Holding constant the risk premium of the risky portfolio, a higher risk-free rate will increase the Sharpe ratio of investments...
A. Capital Allocation Lines The optimal CAL is found as the ray from the risk free...
A. Capital Allocation Lines The optimal CAL is found as the ray from the risk free rate that is tangent to the _____________ and is called the ________________. efficient frontier; CML minimum variance portfolio; high range CAL indifference curve; SML lower half of the investment opportunity set; CAPM B. Capital Allocation Portfolio 1 has a standard deviation of 35% and a Sharpe ratio of 0.48. Portfolio 2 has a standard deviation of 29% and a Sharpe ratio of 0.44. Portfolio...
1. Which of the following statements is least likely to be correct? A. An investor's optimal...
1. Which of the following statements is least likely to be correct? A. An investor's optimal portfolio is an efficient portfolio that provides the highest level of utility. B. The optimal portfolio for an investor is at the point of tangency between the capital allocation line and the lowest possible utility. C. A risk averse investor will have an optimal portfolio to the left of the capital allocation line as compared to a less risk-averse investor. 2. Capital market line...
13) An important measure of asset performance is called Sharpe ratio which is defined as ,...
13) An important measure of asset performance is called Sharpe ratio which is defined as , where and are the asset return and volatility (standard deviation of returns) respectively, and is risk- free return. Asset A has a return of 20% in upside state with probability of 0.4 and -10% in downside state with probability of 0.6 Asset B offers a 1.5% return with a volatility of 10%. Given a risk-free rate of 1%, which asset (A or B) provides...
13) An important measure of asset performance is called Sharpe ratio which is defined as SR=***,...
13) An important measure of asset performance is called Sharpe ratio which is defined as SR=***, where R and o are the asset return and volatility (standard deviation of returns) respectively, and Rf is risk-free return. Asset A has a return of 20% in upside state with probability of 0.4 and -10% in downside state with probability of 0.6 Asset B offers a 1.5% return with a volatility of 10%. Given a risk-free rate of 1%, which asset (A or...
13) An important measure of asset performance is called Sharpe ratio which is defined as SR=...
13) An important measure of asset performance is called Sharpe ratio which is defined as SR= , where R and o are the asset return and volatility (standard deviation of returns) respectively, and Rf is risk-free return. Asset A has a return of 20% in upside state with probability of 0.4 and -10% in downside state with probability of 0.6 Asset B offers a 1.5% return with a volatility of 10%. Given a risk-free rate of 1%, which asset (A...
3. Which of the following statements are true? Please Explain. a. A lower allocation to the risky portfolio reduces the Sharpe (reward-to-volatility) ratio. b. The higher the borrowing rate, the lower the Sharpe ratios of levered portfolios. c. With a fixed risk-free rate, doubling the expected return and standard deviation of the risky portfolio will double the Sharpe ratio. d. Holding constant the risk premium of the risky portfolio, a higher risk-free rate will increase the Sharpe ratio of investments...
13) An important measure of asset performance is called Sharpe ratio which is defined as , where and are the asset return and volatility (standard deviation of returns) respectively, and is risk- free return. Asset A has a return of 20% in upside state with probability of 0.4 and -10% in downside state with probability of 0.6 Asset B offers a 1.5% return with a volatility of 10%. Given a risk-free rate of 1%, which asset (A or B) provides...
13) An important measure of asset performance is called Sharpe ratio which is defined as SR=***, where R and o are the asset return and volatility (standard deviation of returns) respectively, and Rf is risk-free return. Asset A has a return of 20% in upside state with probability of 0.4 and -10% in downside state with probability of 0.6 Asset B offers a 1.5% return with a volatility of 10%. Given a risk-free rate of 1%, which asset (A or...
13) An important measure of asset performance is called Sharpe ratio which is defined as SR= , where R and o are the asset return and volatility (standard deviation of returns) respectively, and Rf is risk-free return. Asset A has a return of 20% in upside state with probability of 0.4 and -10% in downside state with probability of 0.6 Asset B offers a 1.5% return with a volatility of 10%. Given a risk-free rate of 1%, which asset (A...
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