Question
16. You gather the following (annual) information about a two stock portfolio: Stock Weight Expected return Standard deviation GHS 30% 3.666% 10% SBS 70% 7%
16. You gather the following (annual) information about a two stock portfolio:
| Stock | Weight | Expected return | Standard deviation |
| GHS | 30% | 3.666% | 10% |
| SBS | 70% | 7% | 10% |
You also know that the correlation between the two stocks is 0.5 and that the annual risk-free rate is 1%. Compute the Sharpe ratio of this portfolio.
A) The Sharpe ratio is 0.5
B) The Sharpe ratio is 0.563
C) The Sharpe ratio is 0.6
D) The Sharpe ratio is 0.675
E) The Sharpe ratio is 0.788
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Financial Statement Analysis
Authors: Charles H. Gibson
13th International Edition
1133189407, 9781133189404
