Question
Consider the following returns for two investments, A and B, over the past four years: Investment...
Consider the following returns for two investments, A and B, over the past four years:
| Investment 1: | 6% | 17% | -4% | 15% |
| Investment 2: | 3% | 12% | -9% | 15% |
a. Calculate the mean for each investment.
(Round your answers to 2 decimal
places.)
| Investment 1 | % |
| Investment 2 | % |
a.1. Which investment provides the higher return?
-
Investment 2
-
Investment 1
b. Calculate the standard deviation for each investment. (Round your answers to 2 decimal places.)
| Investment 1 SD | % |
| Investment 2 SD | % |
b.1. Which investment provides less risk?
Investment 1
Investment 2
c. Given a risk-free rate of 1.3%, calculate the
Sharpe ratio for each investment. (Round your answers to 2
decimal places.)
| Investment 1 Sharpe Ration | |
| Investment 2 Sharpe Ratio |
c.1 Which investment has performed better?
-
Investment 2
-
Investment 1
Homework Answers
Answer #1
a)
Investment 1 mean return =8.50
Investment 2 mean return =8.14
Investment 1 provide higher return
b)
Investment 1 SD =9.61
Investment 2 SD =11.36
Investment 1 provides less risk
c)
Investment 1 Sharpe Ratio =(8.5-1.3)/9.61=0.75
Investment 2 Sharpe Ratio =(8.14-1.3)/11.36=0.60
Investment 1 has performed better
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