Question: Consider the following summary measures for the annual returns for Vanguards Energy Fund and Vanguards Health Care Fund from 2005 through 2017. Energy: x =

Consider the following summary measures for the annual returns for Vanguard’s Energy Fund and Vanguard’s Health Care Fund from 2005 through 2017.

Energy: x̅ = 9.62% and s = 23.58%
Health Care: x̅ = 12.38% and s = 15.45%


a. Which fund had the higher average return?

b. Which fund was riskier over this time period? Given your answer in part (a), is this result surprising? Explain.

c. Given a risk-free rate of 3%, which fund has the higher Sharpe ratio? What does this ratio imply?

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