$10.$ Risk$-$adjusted stock measurement methods: Sharpe index

Suppose you know the following information about two stocks:

Based on the information in the table, which stock has a higher return?

Stock A

Stock B

Based on the information in the table, which stock has a higher level of risk?

Stock A

Stock B

There are several ways in which investors can measure a stock's risk. One is to examine the

volatility of stock returns by using the reward$-$to$-$variability ratio, also known as the Sharpe

index.

Based on the information in the table, the Sharpe index for stock $A$ is:

$0\mathrm{.}0833$

$0\mathrm{.}1167$

$0\mathrm{.}1667$

$0\mathrm{.}3333$

Based on the information in the table, the Sharpe index for stock B is:

$0\mathrm{.}0706$

$0\mathrm{.}0941$

$0\mathrm{.}1176$

$0\mathrm{.}2471$

Based on the Sharpe ratios, which stock offers more expected excess return per unit of risk?

Stock B

Stock A