Part One.docx - Part One Question 6 We determine the optimal portfolio that performs better by using the Sharpe Ratio or Risk-toReward Ratio This ratio

Part One.docx - Part One Question 6 We determine the...

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Part One Question 6 We determine the optimal portfolio that performs better by using the Sharpe Ratio, or Risk-to- Reward Ratio. This ratio measures the return in excess of the risk-free rate per unit of volatility or total risk. This ratio is calculated by taking the difference between the expected return of the portfolio and the risk-free rate (in this case is the T-bill rate) divided by the standard deviation of the portfolio. We arrive at a Sharpe Ratio of 29.70% for John’s Portfolio, which consists of ^GSPC
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  • Fall '16
  • Modern portfolio theory, sharpe ratio, Treynor ratio, higher Sharpe ratio, Mary’s Portfolio

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