Question

Question 4 xYour answer is incorrect. Try again. The CEO and CFO of Coral Gables Corp were having a discussion about which stock to buy with the company's surplus cash. The CFO noted that it was important that the company incurs less risk for a glven level of return and suggested using the Sharpe Katio cted to b t are the share Eatice ef AMD and INTC and which is the bettar investmantt bared on these retun on INTC is 9% , however the standard deviation on AMD is 0.13164 and on INTC is 0.11140. ASsuming the risk-free SAMD 0.68; S INTC 0.54; INTC OSAMD-0.54: S INTC-0.68; AMD 5AMD- 0.68: S 1NT 0,54: AMD 5AMD-0.54: S TT 0.68: INTC Click if you would like to Show Work for this question: Modify Show Work Please save your WhiteBoard work as an image and send to your instructor outside of WileyPLUS

Answer 1

Option 3 is right

Sharpe Ratio = (expected return- Risk free rate)/ Standard deviation

S( AMD) = (12%-3%)/0.13164=0.683683

S(INTC) = (9%-3%)/0.11140 = 0.5386

Hence AMD is better since higher Sharpe Ratio means that the returns are higher as compared to the risk.