Problem: Your company is considering two mutually exclusive projects A and B. The expected return and standard deviation of project is A 20% and 15%, respectively. The expected return and standard deviation of project B is 25% and 20%, respectively. The risk-free rate is 8%.
a) What is the reward to risk ratio for project A?
b) What is the reward to risk ratio for project B?
c) Which project do you prefer and why?