You want to evaluate three mutual funds using the Treynor measure for performance evaluation.The risk-free return during the sample period is 6%.The average returns,standard deviations,and betas for the three funds are given below,in addition to information regarding the S&P 500 index. $$\begin{array}{l}
\begin{array} { l l l l }
\text { Average Return } & \text { Standard Deviation }&\text { Beta } \
\text { Fund A } &13 \% & 10 \% & 0.5\
\text { Fund B } &19\%&20\%&1.0\
\text { Fund C } &25\%&30\%&1.5\
\text { S\&P 500 } &18\% &16\% &1.0
\end{array}
\end{array}$$
The fund with the highest Treynor measure is _________.

Question

You want to evaluate three mutual funds using the Treynor measure for performance evaluation.The risk-free return during the sample period is 6%.The average returns,standard deviations,and betas for the three funds are given below,in addition to information regarding the S&P 500 index. $$\begin{array}{l}
\begin{array} { l l l l } 
\text { Average Return } & \text { Standard Deviation }&\text { Beta } \
\text { Fund A } &13 \% & 10 \% & 0.5\
\text { Fund B } &19\%&20\%&1.0\
\text { Fund C } &25\%&30\%&1.5\
\text { S\&P 500 } &18\% &16\% &1.0
\end{array}
\end{array}$$
The fund with the highest Treynor measure is _________.

Quizplus · Accepted Answer

The Treynor measure is calculated as (Average Return - Risk-Free Rate) / Beta. For Fund A: (13% - 6%) / 0.5 = 14%. For Fund B: (19% - 6%) / 1.0 = 13%. For Fund C: (25% - 6%) / 1.5 = 12.67%. Fund A has the highest Treynor measure.

You Want to Evaluate Three Mutual Funds Using the Treynor