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%,t he 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%,t he Sharpe performance measures,SHP(X)and SHP(Y),and the performance ranks,respectively,for X and Y are:

Quizplus · Accepted Answer

We can use the Sharpe ratio formula: SHP = (mean return - risk-free rate)/SD.
For country X, SHP(X) = (0.11 - 0.0025)/0.071 = 1.534. 
For country Y, SHP(Y) = (0.071 - 0.0025)/0.077 = 0.919.
Therefore, X has a higher Sharpe ratio and is ranked #1, while Y is ranked #2.
The correct answer is A.

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