CONTEXT: Suppose that you are given these two investment strategies of Company A:

- Strategy 1: Zero-cost collar for which the price of the call option is chosen such that it cost matches the price of the put option (i.e., strategy involving not initial investment since p = c where p: put price and c: call price.

- Strategy 2: Simply holding the S&P100 index.

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Now suppose that you are given the following information regarding the two investment strategies of CompanyA:

Zero-cost Collar (strategy 1)		S&P100 Index (strategy 2)
Annualized mean of the weekly return	0.081	Mean of the weekly returns	0.09
Annualized standard deviation of the weekly returns	0.12	Standard deviation of weekly returns	0.152
Sharpe ratio	0.28	Sharpe ratio	0.25

QUESTIONS

1) Compare both Sharpe ratios, what do you find? Can you conclude confirm that Company A's investment strategy is based on holding zero-cost collar portfolios?

2) How about the expected return and volatility? Does the zero-cost collar's strategy offer a higher return and is it more volatile? What does the theory tells us about the possibility of this outcome?