Asked by Hannah Hanson on Jun 26, 2024
Verified
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?
A) .40
B) .50
C) .75
D) .80
Reward-to-Variability Ratio
A measure of the return on an investment relative to its risk, higher values indicate better risk-adjusted returns.
Standard Deviation
A statistical measure that quantifies the variability or dispersion of a set of data points or the volatility of an investment's returns.
Risk-Free Rate
The theoretical rate of return on an investment with zero risk, typically represented by the yield on government securities.
- Determine and compute the reward-to-variability ratio and understand its importance in making investment choices.
Verified Answer
AB
= .40
Learning Objectives
- Determine and compute the reward-to-variability ratio and understand its importance in making investment choices.