Calculate the Sharpe Ratio for each of the following Managed Funds

Explain the significance of the Sharpe ratio and comment on which of the Funds   has the most favourable risk adjusted return.                   (2 marks)

Assume the risk free rate is 3%

Fund Annual Return % Standard Deviation % A 12 8 B 15 10 C 17 8

QUESTION 5 ( 8 Marks )

You have been provided with share price data for the two companies A Plc and B Plc for a 5 day period. Based on the following data;

Day A Plc (p) B Plc (p) 1 125 52 2 114 53 3 112 58 4 109 64 5 100 65

a. Calculate the standard deviation and the coefficient of variation for each company, using an appropriate methodology. ( 6 marks )

b. Identify which company is more volatile and explain the importance of calculating both the standard deviation and coefficient of variation. ( 2 marks )