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A measure of risk - adjusted performance that is often used is the Sharpe ratio. The Sharpe ratio is calculated as the risk premium of
A measure of riskadjusted performance 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 years listed in the following
table. Calculate the Sharpe ratio for each of these funds. Assume that the expected return
and standard deviation of the company stock will be percent and percent,
respectively. Calculate the Sharpe ratio for the company stock. How appropriate is the
Sharpe ratio for these assets? When would you use the Sharpe ratio?
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