Q:
B) I and IV
C) II and III
D) III and IV
A:
What two components are used to calculate riskadjusted return?
I. Riskfree rate of return
II. Correlation coefficient
III. Conversion ratio
IV. Standard deviation
B) I and IV
C) II and III
D) III and IV
The correct answer is b.
Standard deviation and the riskfree rate of return are used to calculate or measure return based on the level of risk taken using what is called the Sharpe Ratio. Standard deviation is a measure of a portfolio’s total risk. The riskfree rate of return is usually the current rate of shortterm Treasury bills. Correlation coefficient is a measure of how performance between different investments correlates. The conversion ratio is the number of shares of stock received when a convertible bond or preferred stock is converted by the holder.
Standard deviation and the riskfree rate of return are used to calculate or measure return based on the level of risk taken using what is called the Sharpe Ratio. Standard deviation is a measure of a portfolio’s total risk. The riskfree rate of return is usually the current rate of shortterm Treasury bills. Correlation coefficient is a measure of how performance between different investments correlates. The conversion ratio is the number of shares of stock received when a convertible bond or preferred stock is converted by the holder.
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Sharpe Ratio
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