The Sharpe ratio measures:
✓ Correct Answer: Option B
Sharpe ratio = (Rp - Rf) / σp. Higher ratio = better risk-adjusted performance. Compares return premium to total volatility. Useful for comparing portfolios with different risk levels.
Sharpe ratio = (Rp - Rf) / σp. Higher ratio = better risk-adjusted performance. Compares return premium to total volatility. Useful for comparing portfolios with different risk levels.