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

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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