Morgan stock has an average return of 15 percent, a beta of 2.5, and a standard deviation of returns of 20 percent. The Treynor index of Morgan stock is

Question

Quizplus · Accepted Answer

Treynor index = (average return - risk-free rate) / beta

Since the risk-free rate is not given, we cannot calculate the exact value of the Treynor index. However, we can compare the given options to see which one is closest to the actual value.

Using the given information, we can calculate that the Treynor index is approximately (15% - 0%) / 2.5 = 6%.

Option B is the closest answer, as 6% / 1.2 = 5% (where 1.2 is the Sharpe ratio of Morgan stock, calculated as 15% / 20%). Therefore, the best choice is B.

Morgan Stock Has an Average Return of 15 Percent, a Beta