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Which of the following statements is correct? Choose all that are correct. The Sharpe ratio is...

Which of the following statements is correct? Choose all that are correct.

The Sharpe ratio is a risk-adjusted performance measure.

The Sharpe ratio measures compensation for the total risk an investor takes on.

The Sharpe ratio is also called the variability-to-reward ratio.

The higher the Sharpe ratio, the more investors are rewarded per unit of risk.

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Answer #1

Following statement about sharpe ratio are correct-

(A)it is a risk adjusted performance measure and risk is always adjusted in order to finding out the sharpe ratio.

(B)Sharpe ratio will measure the compensation for the total risk and investor will take on because it is the excess of return which is generated for taking over risk free rate.

(D) Sharpe ratio is always considered higher the better and more investor are rewarded per unit of risk.

option (C) is incorrect because sharpe ratio is called reward to variability ratio, it is not called variability to reward ratio.

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