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

Steve has calculated monthly returns and monthly excess returns for Plumeria Inc. Based on 5 years of returns he has calculated that the mean monthly return for Plumeria Inc. is 1.4% and risk-free return is 0.2%. He has also calculated standard deviation of the monthly returns to be 4.2%.

What is the Sharpe ratio for Plumeria Inc?
What is the interpretation of Sharpe ratio?

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