Question
BrightStar Investments is evaluating two investment opportunities: Option A, which has an expected return of 10% and a standard deviation of 12%, and Option B,
BrightStar Investments is evaluating two investment opportunities: Option A, which has an expected return of 10% and a standard deviation of 12%, and Option B, which has an expected return of 8% and a standard deviation of 6%. If the risk-free rate is 4%, calculate the risk-adjusted return for both options using the Sharpe ratio and advise BrightStar Investments on the preferred investment.
Calculate the risk-adjusted return for Option A and Option B using the Sharpe ratio and provide a recommendation to BrightStar Investments.
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