Which one of the following is computed by dividing a portfolio's risk premium by the portfolio beta?
A)raw return
B)Value-at-Risk
C)Jensen's alpha
D)Sharpe ratio
E)Treynor ratio

Question

Quizplus · Accepted Answer

The Treynor ratio is computed by dividing the portfolio's risk premium by the portfolio beta. The other options are computed differently: 
A) Raw return is simply the total return of the portfolio without adjusting for risk. 
B) Value-at-Risk is a measure of the maximum potential loss for a given level of confidence. 
C) Jensen's alpha measures the abnormal returns of a portfolio compared to its expected returns based on the portfolio's level of risk. 
D) Sharpe ratio is computed by dividing the portfolio's excess return (return minus risk-free rate) by the portfolio's standard deviation.

Which One of the Following Is Computed by Dividing a Portfolio's