(4) Asset A has an expected return of 15% and a Sharpe ratio of .4. Asset B has an expected return of 20% and a Sharpe ratio of .3. A rational risk-averse investor would prefer a portfolio using the risk-free asset and ______. A. asset A B. asset B C. no risky asset D. not enough information to determine the answer
Added by Josep C.
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The Sharpe ratio is a measure of risk-adjusted return, calculated as the excess return of an asset (its return above the risk-free rate) divided by its volatility (standard deviation of returns). A higher Sharpe ratio indicates a better risk-adjusted return. Show more…
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