n NISM Certifications
XXI NISM Series XXI-A
Medium

Which of the following is the main purpose of the Sharpe Ratio?

Practice question from NISM XXI A for PMS - Mock Test 2 — bank. The correct answer is highlighted below with a full explanation.

Options

  1. A

    To measure the total return of an investment

  2. To evaluate the risk-adjusted return of an investment

    Correct answer

  3. C

    To determine the volatility of a stock

  4. D

    To assess liquidity risk

Why this is the answer

The Sharpe ratio assesses how well the return compensates for risk.

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