Consider the following returns for two investments, A and B, over the past four

Question

Consider the following returns for two investments, A and B, over the past four years:

Calculate the mean for each investment. (Round your answers to 2 decimal places.)

Which investment provides the higher return?

Calculate the standard deviation for each investment. (Round your answers to 2 decimal places.)

Which investment provides less risk?

Given a risk-free rate of 1.3%, calculate the Sharpe ratio for each investment. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Investment 1: 5% 7% –7% 11%   Investment 2: 7% 15% –18% 19%

Explanation / Answer

4% is the mean of investment 1. (Take the average)

6.75% is the mean of investment 2.

Investment 2 provides the higher return.

c)

are the standard deviations.

d) More the standard deviation, more risky is the investment.

100 105 112.35 104.4855 115.9789 100 107 123.05 100.901 120.0722

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.