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Explain how the sharpe ratio is used to manage risk

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Reference no: EM131844922

Corporate Finance, Ch. 10: Risks and Return

Consider the following as you read:

1. Understand how capital gains and percentage returns are calculated.

2. Explain the difference between average stock returns and risk-free returns.

3. Explain how the Sharpe Ratio is used to manage risk.

4. Describe the significance of US equity risk premiums as a method of comparison with other countries

Corporate Finance, Ch. 11: Return and Risk - Capital Asset Pricing Model

Consider the following as you read:

1. Describe how variance and standard deviation are used to measure the variability of individual stocks.

2. Explain how an investor chooses the best portfolio of stock to hold.

3. Discuss how diversification is used to mitigate risk in the portfolio.

4. Describe the relationship between risk and expected return (CAPM).

Reference no: EM131844922

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