The following table contains the historical average returns, risk premia and standard deviations of three asset classes.
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Question:
The following table contains the historical average returns, risk premia and standard deviations of three asset classes. | |||||||
(All numbers are presented as percentages per year.) | |||||||
T-bills | T-bonds | Market Portfolio(Stocks) | |||||
Average Return | 3.42 | 5.51 | 11.91 | ||||
Risk Premium | n/a | 2.08 | 8.48 | ||||
Standard Deviation | 3.14 | 8.14 | 19.99 | ||||
Estimate the Sharpe Ratio of the stock market portfolio and the Sharpe Ratio of the T-Bonds. | |||||||
Present your results as decimals and round them to two decimal places. | |||||||
Market Sharpe Ratio= | |||||||
T-Bond Sharpe Ratio= | |||||||
(Hints: Assume that market risk premium and market volatility are constant over time. The same for T-Bonds.) |
Related Book For
Business Statistics In Practice
ISBN: 9780073401836
6th Edition
Authors: Bruce Bowerman, Richard O'Connell
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