Exhibit 25.12
Use the Information Below for the Following Problem(S)
An analyst is considering investing in funds A, B, C, and D. The market portfolio, M, is expected to be 11% next period and the risk-free rate of return is 3%. The market portfolio had a standard deviation over the past ten years of 0.20. The analyst gathered the following information on the four funds.
$$\begin{array} { c c c c }
\text { Atack } & \text { Return } & \text { Eetr } & \text { Б } \
\hline \text { A } & 17 \% & 1.7 & .21 \
B & 20 \% & 2.1 & .25 \
\text { C } & 10 \% & 0.9 & .12 \
D & 15 \% & 1.2 & 16
\end{array}$$
-Refer to Exhibit 25.12.Rank the four funds and market portfolio in order from highest to lowest based on their Treynor performance measures.
A) A, B, C, D, M
B) B, C, M, D, A
C) C, A, M, D, B
D) D, A, B, M, C
E) D, B, A, C, M

Question

Exhibit 25.12
Use the Information Below for the Following Problem(S)
An analyst is considering investing in funds A, B, C, and D. The market portfolio, M, is expected to be 11% next period and the risk-free rate of return is 3%. The market portfolio had a standard deviation over the past ten years of 0.20. The analyst gathered the following information on the four funds.
 $$\begin{array} { c c c c } 
\text { Atack } & \text { Return } & \text { Eetr } & \text { Б } \
\hline \text { A } & 17 \% & 1.7 & .21 \
B & 20 \% & 2.1 & .25 \
\text { C } & 10 \% & 0.9 & .12 \
D & 15 \% & 1.2 & 16
\end{array}$$
-Refer to Exhibit 25.12.Rank the four funds and market portfolio in order from highest to lowest based on their Treynor performance measures.
A) A, B, C, D, M
B) B, C, M, D, A
C) C, A, M, D, B
D) D, A, B, M, C
E) D, B, A, C, M

Quizplus · Accepted Answer

The Treynor measures for the four funds are computed as follows:
A = (.17 - .03)/1.7 = 0.082
B = (.20 - .03)/2.1 = 0.081
C = (.10 - .03)/0.9 = 0.078
D = (.15 - .03)/1.2 = 0.100
M = (.11 - .03)/1.0 = 0.080
Ranking the funds and market portfolio from highest to lowest: D,A,B,M,C

Exhibit 25 -Refer to Exhibit 25