Question: Jay has calculated monthly returns and monthly excess returns for Guava Inc. Based on 5 years of returns he has calculated that the mean monthly

Jay has calculated monthly returns and monthly excess returns for Guava Inc. Based on 5 years of returns he has calculated that the mean monthly return for Guava Inc. is 2.3% and risk free return is 0.25%. He has also calculated standard deviation of the monthly returns to be 4.1%.

-What is the Sharpe ratio for Guava Inc?

-What is the interpretation of Sharpe ratio?

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