Assume the market return is 14% with a standard deviation of 20%, and risk-free rate is 8%. The average annual returns for Managers D, E, and F are 13%, 17%, and 16% respectively. The corresponding standard deviations are 18%, 22%, and 23%. What are the Sharpe ratios for the market and managers?

Assume the market return is 14% with a standard deviation of 20%, and risk-free rate is 8%. The average annual returns for Managers D, E, and F are 13%, 17%, and 16% respectively. The corresponding standard deviations are 18%, 22%, and 23%. What are the Sharpe ratios for the market and managers?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter2: Risk And Return: Part I

Section: Chapter Questions

Problem 3Q: Security A has an expected return of 7%, a standard deviation of returns of 35%, a correlation...

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Question

Assume the market return is 14% with a standard deviation of 20%, and risk-free rate is 8%. The
average annual returns for Managers D, E, and F are 13%, 17%, and 16% respectively. The
corresponding standard deviations are 18%, 22%, and 23%. What are the Sharpe ratios for the market
and managers?

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Step 2: Computation of Sharpe ratio for Market

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Step 3: Computation of Sharpe ratio for Manager D

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Step 4: Computation of Sharpe ratio for Manager E

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Step 5: Computation of Sharpe ratio for Manager F.

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