Sharpe ratio for stock b

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1. Is it possible to construct a portfolio of real-world stocks that has a required return equal to the risk-free rate? Explain.

2. Suppose you own Stocks A and B. Based on data over the past decade, the Sharpe ratio for Stock A is 1.3, while the Sharpe ratio for Stock B is 0.8. Briefly explain which stock has performed better.

3. ABC Company's stock earned a return of 10% this past year. Investors' required return for this stock based on the SML equation was 9%. Where would this stock plot on the SML? What can you say about this investment's alpha? Explain.

Reference no: EM132645848

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