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Year Chevron Caterpillar 1 3 5 % 1 4 % 2 2 0 % 3 0 % 3 3 % 3 0 % 4 1

Year Chevron Caterpillar
135%14%
220%30%
33%30%
415%55%
a. Which fund had the higher arithmetic average return?
b. Which fund was riskier over this time period?
c. Given a risk-free rate of 1%, which fund has the higher Sharpe ratio? What does this imply?

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