The U.S. Treasury bill is yielding 3.0% and the market has an expected return of 11.6%. What is the Treynor ratio of a correctly-valued portfolio that has a beta of 1.02 and a standard deviation of 12.2%?
A).074
B).086
C).102
D).619
E).628

Question

Quizplus · Accepted Answer

The Treynor Ratio is calculated as (Portfolio Return - Risk-Free Rate) / Beta. For a correctly-valued portfolio, the expected return is the market return. Thus, Treynor Ratio = (11.6% - 3.0%) / 1.02 = 8.43% or .0843, which rounds to option B, .086.

The US Treasury Bill Is Yielding 3