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Category > Business & Finance Posted 22 Jul 2017 My Price 12.00

Calculating the Sharpe Ratio.

Calculating the Sharpe Ratio.

In earlier examples, we computed the various statistics for two mutual funds, Selected American Shares (SLASX) and T. Rowe Price Equity Income (PRFDX), for a five year period ending in December 2002. summarizes selected statistics for these two mutual funds for a longer period, the 10-year period ending in 2002.

Mutual Fund Mean Return and Standard Deviation of Return, 1993-2002

Fund

Arithmetic Mean

Standard Deviation of Return

SLASX

12.58%

19.44%

PRFDX

11.64%

13.65%

The U.S. 30-day T-bill rate is frequently used as a proxy for the risk-free rate. Given the annual return on T-bills for the 1993-2002 period.

 

Annualized U.S.
 

30-Day 1-Bill
 

Rates of Return,
 

1993-2002

Year

Return

1993

2.90%

1994

3.90%

1995

5.60%

1996

5.21%

1997

5.26%

1998

4.86%

1999

4.68%

2000

5.89%

2001

3.83%

2002

1.65%

Using the information in Tables 3-25 and 3-26, address the following.

1. Calculate the Sharpe ratios for SLASX and PRFDX during the 1993-2002 period.

2. State which fund had superior risk-adjusted performance during this period, as measured by the Sharpe ratio

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Status NEW Posted 22 Jul 2017 12:07 PM My Price 12.00

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