Question 1 of 30
A financial services firm is analyzing the performance of its investment portfolio using Salesforce Financial Services Cloud. The firm has a total investment of $1,000,000, which has generated a return of $150,000 over the past year. The firm also incurs annual management fees of $20,000. To assess the portfolio\'s performance, the firm calculates the net return on investment (ROI) and the Sharpe ratio, assuming the risk-free rate is 2%. What is the correct interpretation of the Sharpe ratio calculated from this data?
The portfolio has a higher risk-adjusted return compared to the risk-free rate, indicating effective management of investment risk.
The portfolio's performance is below the risk-free rate, suggesting that the investment strategy is ineffective.
The Sharpe ratio indicates that the portfolio is highly volatile and not suitable for conservative investors.
The portfolio's returns are solely due to market movements, with no active management contributing to performance.

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