The Following Table Summarizes Selected Statistics for Two Portfolios for a 10-Year

question 56

Multiple Choice

The following table summarizes selected statistics for two portfolios for a 10-year period ending in 2006.Assume that the risk-free rate is 4% over this period. As measured by the Sharpe ratio,the fund with the superior risk-adjusted performance during this period is _________________________________________________________.

• A) Fund A because it has a lower positive Sharpe ratio than Fund B
• B) Fund B because it has a lower positive Sharpe ratio than Fund A
• C) Fund A because it has a higher positive Sharpe ratio than Fund B
• D) Fund B because it has a higher positive Sharpe ratio than Fund A

---

Definitions:

Government Interference

Actions taken by government to affect decisions made by individuals, companies, or other governments, which can include regulations, laws, and taxes.

Market Equilibrium

A situation where, at the current price, the quantity of goods supplied equals the quantity of goods demanded, leading to a stable market condition.

Optimal Allocation

The most efficient distribution of resources and services, maximizing the benefit from their use.

External Costs

Costs not reflected in the market price of goods or services, borne by a third party or society at large.