Respuesta :
The correct option is (B).Investments with a Sharpe ratio 1 are wise.
What is the Sharpe ratio?
The Sharpe ratio aims to illustrate how effectively an asset's return reimburses an investor for the risk taken. Investors typically find it interesting when two assets are compared because the one with a higher Sharpe ratio seems to offer a better return for the same risk.
Since financial assets are frequently not regularly distributed, the standard deviation frequently does not fully represent the risk. As an illustration, Ponzi schemes will have a high empirical Sharpe ratio up until they collapse. Similar to this, unless one of those puts is exercised, resulting in a sizable loss, a fund that sells low-strike put options will have a high empirical Sharpe ratio. The empirical standard deviation before failure in both situations does not actually indicate the magnitude of the risk being taken.
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