Consider the following information: Portfolio Expected Return Standard Deviation Risk-free 6 % 0 % Market 10.8 24 A 8.8 13 a. Calculate the Sharpe ratios for the market portfolio and portfolio

Sharpe ratio of market portfolio = 0.2

Sharpe ratio of market portfolio = 0.2154

Explanation:

Calculation for the Sharpe ratios for the market portfolio and portfolio A

Market portfolio

Using this formula

Sharpe ratio of market portfolio = (Expected return of portfolio - Risk free return on portfolio)/ Standard deviation

Let plug in the formula

Sharpe ratio of market portfolio= (10.8 - 6)/24

Sharpe ratio of market portfolio=4.8/24

Sharpe ratio of market portfolio = 0.2

Portfolio A

Using this formula

Sharpe ratio of portfolio A = (Expected return of portfolio - Risk free return on portfolio)/ Standard deviation

Let plug in the formula

Sharpe ratio of portfolio A= (8.8 - 6)/13

Sharpe ratio of portfolio A=2.8/14

Sharpe ratio of portfolio A= 0.2154

Therefore the Sharpe ratios for the market portfolio is 0.2 and portfolio A is 0.2154

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