The Treynor ratio measures the _________ per unit of ___________ risk.
A) Raw return; total
B) Raw return; systematic
C) Portfolio excess return; systematic
D) Portfolio excess return; total
E) Portfolio excess return; unique

Question

Quizplus · Accepted Answer

The Treynor ratio is calculated by dividing the portfolio excess return by the systematic risk (beta). Therefore, it measures the excess return of a portfolio per unit of systematic risk. Choice A is incorrect because it measures raw return, not excess return. Choice B is incorrect because it measures systematic risk only, not the ratio of excess return to systematic risk. Choice D is incorrect because it includes both systematic and unique risk in the denominator, which is not consistent with the calculation of the Treynor ratio. Choice E is incorrect because it refers only to the unique risk, which is not considered in the calculation of the Treynor ratio.

The Treynor Ratio Measures the _________ Per Unit of ___________

The Treynor Ratio Measures the _ Per Unit of ___