Final answer:
The Sharpe ratio for a portfolio with a return of 15%, a standard deviation of 16%, and a risk-free rate of 3.9% is calculated as (15% - 3.9%) ÷ 16%, which equals approximately 0.694.
Step-by-step explanation:
The student has asked about the Sharpe ratio, which is a measure of the risk-adjusted return of an investment portfolio. To calculate the Sharpe ratio, we subtract the risk-free rate from the portfolio's return and then divide by the standard deviation of the portfolio's excess return. In this case, the portfolio had a return of 15% last year and a standard deviation of 16%. The risk-free rate, represented by T-bills, was 3.9%. Using the formula:
Sharpe Ratio = (Portfolio return - Risk-free rate) ÷ Standard deviation
We can plug in the given numbers:
Sharpe Ratio = (15% - 3.9%) ÷ 16%
Sharpe Ratio = 11.1% ÷ 16%
Sharpe Ratio = 0.694
Therefore, the Sharpe measure for this portfolio is approximately 0.694.