Exhibit 18-11
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)
The last year's performance for four mutual funds is presented below. The market return was 10.70%, last year with a standard deviation of 13.1% and the risk-free rate of return was 5%. $$\begin{array} { c c c c }
\text { Fund } & \text { Beta } & \begin{array} { c }
\text { Standard } \
\text { Deviation (\%) }
\end{array} & \text { Return (\%) } \
\hline \text { A } & 1.50 & 18.95 & 12.5 \
\text { B } & 1.20 & 12.41 & 13.0 \
\text { C } & 0.90 & 9.30 & 11.2 \
\text { D } & 0.50 & 8.10 & 9.5
\end{array}$$
-Refer to Exhibit 18-11. Compute the Treynor Measure for the C fund.
A) 0.012
B) 0.040
C) 0.069
D) 0.396
E) 1.142

Question

Exhibit 18-11
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)
The last year's performance for four mutual funds is presented below. The market return was 10.70%, last year with a standard deviation of 13.1% and the risk-free rate of return was 5%. $$\begin{array} { c c c c } 
\text { Fund } & \text { Beta } & \begin{array} { c } 
\text { Standard } \
\text { Deviation (\%) }
\end{array} & \text { Return (\%) } \
\hline \text { A } & 1.50 & 18.95 & 12.5 \
\text { B } & 1.20 & 12.41 & 13.0 \
\text { C } & 0.90 & 9.30 & 11.2 \
\text { D } & 0.50 & 8.10 & 9.5
\end{array}$$
-Refer to Exhibit 18-11. Compute the Treynor Measure for the C fund.
A) 0.012
B) 0.040
C) 0.069
D) 0.396
E) 1.142

Quizplus · Accepted Answer

The Treynor Measure is calculated as the ratio of the excess return of the portfolio over the risk-free rate to the beta of the portfolio. For Fund C, the excess return is $11.2\% - 5\% = 6.2\%$, and the beta is 0.90. Thus, the Treynor Measure for Fund C is $\frac{6.2\%}{0.90} = 0.0689$, which rounds to 0.069 or 6.9%.

Exhibit 18-11 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)

Exhibit 18-11
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)