The U.S. Treasury bill is yielding 2.8 percent and the market has an expected return of 11.6 percent. What is the Treynor ratio of a correctly-valued portfolio that has a beta of .92, and a standard deviation of 12.2 percent?

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The Treynor ratio is calculated as (Portfolio Return - Risk-Free Rate) / Beta. Assuming the portfolio is correctly valued, its expected return is the same as the market's expected return, which is 11.6%. Thus, Treynor ratio = (11.6% - 2.8%) / 0.92 = 0.088.

The US Treasury Bill Is Yielding 2