n NISM Certifications
V-A NISM Series V-A
Medium

The return from a fund is 9%, Standard Deviation is 0.75, and the Beta is 1.4. The risk-free rate of return is 7%. What is the DENOMINATOR in the calculation of the Sharpe Ratio?

Practice question from NISM Series V A - Mock Test 3 — bank. The correct answer is highlighted below with a full explanation.

Options

  1. A

    9

  2. B

    0.4

  3. C

    7

  4. 0.75

    Correct answer

Why this is the answer

The Sharpe Ratio formula is: \[ \text{Sharpe Ratio} = \frac{\text{Return Earned} - \text{Risk-Free Return}}{\text{Standard Deviation}} \]

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