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Assume that you manage a risky portfolio with an expected rate of return of 17% and a variance of 27%. The T-note rate is 7%. What is the reward-to-volatility ratio of your risky portfolio

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Answer: 0.1925

Explanation:

Reward to volatility ratio = (Expected return - Risk free rate) / Standard deviation

Standard deviation = √27%

= 0.5196

Reward to volatility ratio = (17% - 7%) / 0.5196

= 0.1925

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