Which of the following statements are true? Explain. a. A lower allocation to the risky portfolio reduces

Question:

Which of the following statements are true? Explain.

a. A lower allocation to the risky portfolio reduces the Sharpe (reward-to-volatility) ratio.

b. The higher the borrowing rate, the lower the Sharpe ratios of levered portfolios.

c. With a fixed risk-free rate, doubling the expected return and standard deviation of the risky portfolio will double the Sharpe ratio.

d. Holding constant the risk premium of the risky portfolio, a higher risk-free rate will increase the Sharpe ratio of investments with a positive allocation to the risky asset.

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The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these... Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...