NISM Certifications · NISM-Series-V-A: Mutual Fund Distributors · Mutual Fund Scheme Performance
The Sharpe ratio of a mutual fund scheme is calculated as:
The Sharpe ratio equals scheme return minus the risk-free return, divided by the standard deviation of the scheme's returns. It shows the excess return earned per unit of total risk. Dividing by beta instead gives the Treynor ratio.
- A(Scheme return minus risk-free return) divided by the standard deviation of scheme returnsCorrect
- B(Scheme return minus risk-free return) divided by beta
- CScheme return divided by the benchmark return
- D(Scheme return minus benchmark return) divided by the expense ratio
Explanation
The Sharpe ratio measures excess return over the risk-free rate per unit of total risk, with total risk shown by standard deviation. Dividing by beta gives the Treynor ratio. The other options are not standard risk-adjusted measures.
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