Sharpe Ratio:
a) We expect to have our stock portfolio to return 11% next year. The return on the risk-free T-bills is 3.2% and our portfolio has 5% standard deviation. What is the Sharpe ratio?
b) Stock portfolio A has a Sharpe ratio of 1.6 and an expected return of 10%. An alternative stock portfolio B has a Sharpe ratio of 1.2 and an expected return of 10%. In which one should you invest?
c) Stock portfolio A has a Sharpe ratio of 1.6 and an expected return of 10%. An alternative stock portfolio C has a Sharpe ratio of 1.6 and an expected return of 11%. In which one should you invest?