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 for country X is calculated as (mean return of X - risk-free rate) / SD of X = (11-0.25) / 7 = 1.5536. The Sharpe performance measure for country Y is also calculated as (mean return of Y - risk-free rate) / SD of Y = (11-0.25) / 8 = 1.34375. Therefore, SHP(X) = 1.5536 and SHP(Y) = 1.34375. Since SHP(X) > SHP(Y), the rank of X is 1 and the rank of Y is 2. Thus, the correct answer is A.

The Mean and Standard Deviation (SD) of Monthly Returns, Over