Suppose a world has two risky assets: HotPot and IceCream. The following table shows the holding period returns in each scenario. Suppose the T-bill rate is 5%.   Scenario Probability Return (HotPot) Return (IceCream) Rainy 0.02 10% -5% Snowy 0.03 15% -15% Windy 0.9 10% 8% Sunny 0.05 -10% 25% Which answer is the closest value to the Sharpe ratio for IceCream?   A. 0.8   B. 0.6   C. 0.9   D. 0.5

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Suppose a world has two risky assets: HotPot and IceCream. The following table shows the holding period returns in each scenario. Suppose the T-bill rate is 5%.

 

Scenario

Probability

Return (HotPot)

Return (IceCream)

Rainy

0.02

10%

-5%

Snowy

0.03

15%

-15%

Windy

0.9

10%

8%

Sunny

0.05

-10%

25%

Which answer is the closest value to the Sharpe ratio for IceCream?

  A.

0.8

  B.

0.6

  C.

0.9

  D.

0.5

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