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5- A measure of risk-ariusted perfcnnance that is often used is the Sharpe ratio. The Sharpe ratio is calculated as the risk premium of an
5- A measure of risk-ariusted perfcnnance that is often used is the Sharpe ratio. The Sharpe ratio is calculated as the risk premium of an asset divided by its standard deviation. The standard deviation and return of the funds over the past 1i] years are listed in the following table- Calculate the Sharpe ratio for each of these funds. Assume that the expected retum and standard deviation of the company stools: will be 13 percent and 1H] percent, respectively. Calculate the Sharpe ratio for the company stock. How appropriate is the Sharpe ratio for these assets? 1li'il'hen would you use the Sha rpe ration\"?l
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