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Compare the maximum probability of insolvency to the Sharpe ratio defined as: (Expected return - Rf)/Return where Rf is the default risk-free rate and Return
Compare the maximum probability of insolvency to the Sharpe ratio defined as: (Expected return - Rf)/Return where Rf is the default risk-free rate and Return is the expected volatility of return of the company. If the probability of insolvency increases, will the Sharpe ratio increase or decrease?
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