The Sharpe's Measure for Jane Smith's Investment Portfolio Is 0

question 8

Multiple Choice

The Sharpe's measure for Jane Smith's investment portfolio is 0.40, while the Sharpe's measure for the market is 0.30. This information suggests that Smith's portfolio

• A) exhibits superior performance because its risk premium per unit of risk is above that of the market.
• B) exhibits poor performance because its risk premium per unit of risk is below that of the market.
• C) is inadequately diversified, and more securities should be added to the portfolio in order to bring it in line with the market.
• D) is overly diversified, and some securities should be sold to bring the portfolio in line with the market.

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Definitions:

Innovation

The process of creating new products, services, or methods that improve efficiency or provide new benefits.

Distribution Method

Strategies and channels a company uses to deliver its goods or services to consumers.

Inverted-U Theory

A hypothesis suggesting that income inequality will rise and then fall over the course of economic development, forming an inverted U-shape curve.

R&D Expenditures

Funds allocated by companies, institutions, or governments towards research and development activities to innovate or improve products, services, or processes.