The following data are available relating to the performance of Sooner Stock Fund and the market portfolio: The risk-free return during the sample period was 3%.
What is the Treynor measure of performance evaluation for Sooner Stock Fund?
A)1.33%
B)4.00%
C)8.67%
D)9.44%

Question

The following data are available relating to the performance of Sooner Stock Fund and the market portfolio:  The risk-free return during the sample period was 3%.
What is the Treynor measure of performance evaluation for Sooner Stock Fund?
A)1.33% 
B)4.00% 
C)8.67% 
D)9.44%

Quizplus · Accepted Answer

The Treynor measure is calculated as follows:

Treynor = (Portfolio Return - Risk-Free Rate) / Beta

Sooner Stock Fund's portfolio return is 19% - 3% = 16%.

Using the data provided:

Beta for Sooner Stock Fund = 1.2 
Market Portfolio Return = 11%

Treynor = (16% - 3%) / 1.2 = 9.44%

Therefore, the Treynor measure of performance evaluation for Sooner Stock Fund is 9.44%.

The best choice is D.

The Following Data Are Available Relating to the Performance of Sooner