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Asset+a+has+an+expected+return+of+20%+and+a+standard+deviation+of+25%.+the+risk+free+rate+is+10%.+what+is+the+reward-to-variability+ratio?

Respuesta :

Expected return20

Standard deviation:25% 

Risk-Free Rate (Rf):10%

Ratio of Reward to Variability (A) =

     Solution:

  • By compensating for the risk involved, the Sharpe Ratio calculates the expected rate of return for each portfolio.
  • Reward-to-Variability Ratio is another name for the Sharpe ratio. Since it compares the projected return on an investment with the risk involved (standard deviation).

The formula to calculate it is as follows:

Reward-to-Variability Ratio/Sharpe Ratio = (EA - Rf)/ A

Reward-to-Variability Ratio = (20-10)/25

Ratio of Reward to Variability = 10/25

Ratio of Reward to Variability = 0.40

As a result, Asset A has a 0.40 reward-to-variability ratio.

To learn more about Reward-to-Variability ratio visit:https://brainly.com/question/13961244

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