The Expected Returns for Securities ABC and XYZ Are 8

question 111

Multiple Choice

The expected returns for Securities ABC and XYZ are 8 percent and 13 percent,respectively.The standard deviation is 12 percent for ABC and 18 percent for XYZ.There is no relationship between the returns on the two securities.The market return is 12.5 percent with a standard deviation of 16 percent.The risk-free rate is 5 percent.What is the Sharpe ratio of a portfolio with 40 percent of the funds in ABC and 60 percent in XYZ?

• A) 0.47
• B) 0.51
• C) 0.75
• D) 0.93

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