Question: Consider the following data for two investments, A and B:
Investment A: x‾ = 8 and s = 5
Investment B: x‾ = 10 and s = 7
a. Which investment provides the higher return? Which investment provides the least risk? Explain.
b. Given a risk-free rate of 2%, calculate the Sharpe ratio for each investment. Which investment provides the higher reward per unit of risk? Explain.