Answer: C. measuring relation of real returns to risk
Explanation:
It is generally said that the riskier the asset, the higher the reward. This is why risk-free investments like US Treasury Notes and Bills have such low returns but risker investments like corporate bonds will give you a extra return for being riskier than the safe investments.
The Sharpe ratio is used to calculate that extra return you get over the risk-free asset when you hold a risky asset which means that in summary, it measures the relation of real returns to risk.
