Explore BrainMass

Explore BrainMass

    Risk-Adjusted Return Measurements

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Assume the following information over a five year period:

    Average risk free rate = 6%
    Average return for crane stock = 11%
    Average return for load stock = 14%
    Standard deviation of crane stock returns = 2%
    Standard deviation of load stock returns = 4%
    Beta of crane stock = 0.8
    Beta of load stock = 1.1

    Determine which stock has higher risk-adjusted returns when using the Sharpe index. Which stock has higher risk-adjusted returns when using the treynor index? Please show work.

    © BrainMass Inc. brainmass.com June 3, 2020, 11:31 pm ad1c9bdddf
    https://brainmass.com/business/finance/risk-adjusted-return-measurements-283644

    Solution Preview

    Sharpe index = (Average Return - Average Risk-Free Return) / Standard Deviation

    Crane stock: (11% - 6%) / 2% = 2.5%
    Load ...

    Solution Summary

    This solution is comprised of step-by-step calculation to this question:

    Determine which stock has higher risk-adjusted returns when using the Sharpe index. Which stock has higher risk-adjusted returns when using the treynor index? Please show work.

    $2.19

    ADVERTISEMENT