If the average realized return of a portfolio is 20% per year, the standard deviation of returns is 30%, the portfolio beta is 1.5, the average return of Treasury bills over the same period is 5% per year, and the average return on the market is 15% per year, the Treynor measure is
A) 0.10
B) 0.25
C) 0.50
D) 0.75

Question

Quizplus · Accepted Answer

The Treynor measure is calculated as (Rp - Rf) / Beta, where Rp is the portfolio's average realized return, Rf is the risk-free rate, and Beta is the portfolio's beta. In this case, Rp = 20%, Rf = 5%, and Beta = 1.5, so the Treynor measure is (20% - 5%) / 1.5 = 10%.

If the Average Realized Return of a Portfolio Is 20