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← Measuring Risk-Adjusted Returns
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Question
Fund A returns 14% with 18% volatility. Fund B returns 10% with 8% volatility. The risk-free rate is 2%. Which fund has a higher Sharpe ratio?
1
Both funds have identical Sharpe ratios
2
Fund B, with a Sharpe ratio of approximately 1.00
3
Fund A, with a Sharpe ratio of approximately 0.67
4
Fund A, because its absolute return is higher
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