EBK FUNDAMENTALS OF CORPORATE FINANCE A
10th Edition
ISBN: 9780100342613
Author: Ross
Publisher: YUZU
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Chapter 12, Problem 5M
A measure of risk-adjusted performance that is often used is the Sharpe ratio. The Sharpe ratio is calculated as the risk premium of an asset divided by its standard deviation. The standard deviation and return of the funds over the past 10 years are listed in the following table. Calculate the Sharpe ratio for each of these funds. Assume that the expected return and standard deviation of the company stock will be 18 percent and 70 percent, respectively. Calculate the Sharpe ratio for the company stock. How appropriate is the Sharpe ratio for these assets? When would you use the Sharpe ratio?
| 10-Year Annual Return | Standard Deviation | |
| Bledsoe S&P 500 Index Fund | 11.48% | 15.82% |
| Bledsoe Small-Cap Fund | 16.68 | 19.64 |
| Bledsoe Large-Company Stock Fund | 11.85 | 15.41 |
| Bledsoe Bond Fund | 9.67 | 10.83 |
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Chapter 12 Solutions
EBK FUNDAMENTALS OF CORPORATE FINANCE A
Ch. 12.1 - Prob. 12.1ACQCh. 12.1 - Why are unrealized capital gains or losses...Ch. 12.1 - What is the difference between a dollar return and...Ch. 12.2 - Prob. 12.2ACQCh. 12.2 - Why doesnt everyone just buy small stocks as...Ch. 12.2 - Prob. 12.2CCQCh. 12.2 - About how many times did large-company stocks...Ch. 12.2 - What was the longest winning streak (years without...Ch. 12.2 - How often did the T-bill portfolio have a negative...Ch. 12.3 - Prob. 12.3ACQ
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