A More Recent Adjustment to the Sharpe Measurement for Portfolio

question 96

Multiple Choice

A more recent adjustment to the Sharpe measurement for portfolio evaluation is

• A) To divide the portfolio risk premium by total risk rather than the portfolio's beta.
• B) To divide the portfolio risk premium by standard deviation rather than the portfolio's beta.
• C) To divide the portfolio risk premium by the excess portfolio return rather than total risk.
• D) To divide the excess portfolio return by the portfolio's standard deviation.
• E) To divide the excess portfolio return by the portfolio's beta.

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Definitions:

Prudently

Acting with or showing care and thought for the future, often within the context of managing finances or making financial decisions.

Ex-Dividend Date

The cutoff date established by a company by which investors must be on the company's books to receive the next dividend payment.

Homemade Dividend Policy

A strategy in which investors create their own dividend policy by selling a portion of their portfolio of equities.

Residual Dividend Approach

A method used by companies to determine the dividend payments based on the residual or leftover earnings after all operational and investment costs have been met.