Question

The manhawkin fund has an expected return of 16% and a standard deviation of 20%. the risk-free rate is 4%. what is the reward-to-volatility ratio for the manhawkin fund?

Answer 1

We know that expected return is 16%. The standard deviation is 20%. And in addition, the risk-free rate is 4%. Denote with x: expected return, "Y": the risk-free rate and sigma: standard deviation. The reward-to-volatility ratio is(x-y) / (sigma) = (16-4) / 20 = .6