A portfolio produces the following returns in years 1-5: Year Return (%) 1 4 2 -5...
A portfolio produces the following returns in years 1-5:
| Year | Return (%) |
| 1 | 4 |
| 2 | -5 |
| 3 | 4 |
| 4 | 8 |
| 5 | -1 |
What is the Sharpe ratio of this portfolio, if the average risk free rate over the same time period was 3%?
Enter answer accurate to 2 decimal places.
Homework Answers
Sharpe ratio = (Rp - Rf)/ SD(p)
Rp = Average return of the portfolio = 2 (using excel formula average(r1....r5)
SD(p) = 5.05 (using excel formula stdev.s(r1....r5))
Sharpe ratio = (2 - 3%)/5.05 = -0.198 = -0.20 (rounded off to two decimals)
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