The mean and standard deviation (SD)of monthly returns,over a given period of time,for the stock markets of two countries,X and Y are Assuming that the monthly risk-free interest rate is 0.25%,the Sharpe performance measures,SHP(X)and SHP(Y),and the performance ranks,respectively,for X and Y are:

Question

The mean and standard deviation (SD)of monthly returns,over a given period of time,for the stock markets of two countries,X and Y are  Assuming that the monthly risk-free interest rate is 0.25%,the Sharpe performance measures,SHP(X)and SHP(Y),and the performance ranks,respectively,for X and Y are:

Quizplus · Accepted Answer

The Sharpe performance measure is calculated as the excess return of the investment over the risk-free rate divided by the standard deviation of the investment.

For country X, the excess return is 11% - 0.25% = 10.75%, and the standard deviation is 15%. Therefore, SHP(X) = 10.75% / 15% = 0.7167.

For country Y, the excess return is 7% - 0.25% = 6.75%, and the standard deviation is 12%. Therefore, SHP(Y) = 6.75% / 12% = 0.5625.

Since SHP(X) > SHP(Y), country X has a higher performance ranking, and is ranked 1. Conversely, country Y is ranked 2.

Therefore, the correct choice is A.

The Mean and Standard Deviation (SD)of Monthly Returns,over a Given