Question

The U.S. Treasury bill is yielding 3.0 percent and the market has an expected return of 11.6 percent. What is the Treynor ratio of a portfolio that has a beta of 1.02, and a standard deviation of 12.2 percent?

Answer 1

Treynor ratio = Market return - Risk-free rate

Portfolio beta

= 11.6 - 3.0

1.02

= 8.43%

Step-by-step explanation:

Treynor ratio is the ratio of risk-premium to portfolio beta. Risk-premium is the excess of market return over risk-free rate, Treynor ratio is used for measuring the performance of a portfolio.