You want to evaluate three mutual funds using the Treynor measure for performance evaluation.The risk-free return during the sample period is 6%.The average returns, standard deviations, and betas for the three funds are given below, in addition to information regarding the S&P 500 Index. The fund with the highest Treynor measure is
A)Fund A.
B)Fund B.
C)Fund C.
D)Funds A and B (tied for highest).
E)Funds A and C (tied for highest).

Question

You want to evaluate three mutual funds using the Treynor measure for performance evaluation.The risk-free return during the sample period is 6%.The average returns, standard deviations, and betas for the three funds are given below, in addition to information regarding the S&P 500 Index.  The fund with the highest Treynor measure is
A)Fund A. 
B)Fund B. 
C)Fund C. 
D)Funds A and B (tied for highest). 
E)Funds A and C (tied for highest).

Quizplus · Accepted Answer

A: (13% - 6%)/0.5 = 14; B: (19% - 6%)/1.0 = 13; C: (25% - 6%)/1.5 = 12.7; S&P 500: (18% - 6%)/1.0 = 12.

You Want to Evaluate Three Mutual Funds Using the Treynor