Morgan stock has an average return minus the average risk-free rate of 12.5 percent, a beta of 2.5, and a standard deviation of returns of 20 percent. The Treynor index of Morgan stock is
A) 0.0625.
B) 0.05.
C) 0.35.
D) 0.03.
E) none of the above

Question

Quizplus · Accepted Answer

The Treynor index is calculated as the excess return (average return minus risk-free rate) divided by the beta. Here, it is 12.5% / 2.5 = 0.05.

Morgan Stock Has an Average Return Minus the Average Risk-Free