The following data are available relating to the performance of Tiger Fund and the market portfolio: $\begin{array}{lcc}
& \text {Tiger } & \text { Market } \
&&\text { Portfolio }\
\text { Average return } & 18 \% & 15\% \
\text { Standard deviations of returns } & 25\% & 20\% \
\text { Beta } & 1.25 & 1.00 \
\text { Residual standard deviation } &2 \% & 0 \%
\end{array}$
The risk-free return during the sample period was 7%.
Calculate Treynor's measure of performance for Tiger Fund.
A) 1.00%
B) 8.80%
C) 44.00%
D) 50.00%

Question

The following data are available relating to the performance of Tiger Fund and the market portfolio: $\begin{array}{lcc} 
& \text {Tiger } & \text { Market } \  
&&\text { Portfolio }\
\text { Average return } & 18 \% & 15\% \
\text { Standard deviations of returns } & 25\% & 20\% \
\text { Beta } & 1.25 & 1.00 \
\text { Residual standard deviation } &2 \% & 0 \%
\end{array}$ 
 The risk-free return during the sample period was 7%.
Calculate Treynor's measure of performance for Tiger Fund.
A) 1.00%
B) 8.80%
C) 44.00%
D) 50.00%

Quizplus · Accepted Answer

Treynor's measure is calculated as $\frac{Portfolio\ Return - Risk\ Free\ Rate}{Beta}$. For Tiger Fund, it's $\frac{18\% - 7\%}{1.25} = \frac{11\%}{1.25} = 8.8\%$.

The Following Data Are Available Relating to the Performance of Tiger