Sharpe Ratio Evaluation for Portfolio Management

Medium Performance Evaluation Risk-adjusted Measures

Jane is a portfolio manager who wishes to evaluate the performance of her investment fund against a benchmark. Over the past year, her fund had a return of 12% with a standard deviation of 8%. The benchmark index generated a return of 9% with a standard deviation of 5%. To assess the effectiveness of her fund's performance, Jane decides to use the Sharpe Ratio.

Which of the following statements regarding the Sharpe Ratio of Jane's fund relative to the benchmark is accurate?

The Sharpe Ratio of Jane's fund is higher than that of the benchmark, indicating superior risk-adjusted performance.

The Sharpe Ratio cannot be calculated without knowing the risk-free rate.

The Sharpe Ratio of Jane's fund is equal to that of the benchmark, suggesting that both perform equally on a risk-adjusted basis.

Hint

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% Correct97%