Question
In: Finance
Portfolio Average Return Standard Deviation Beta A &nb
Portfolio Average Return Standard Deviation Beta
A 14.7% 18.6% 1.47
B 8.8 14.2 .78
C 11.2 16.0 1.22
The risk-free rate is 4.5 percent and the market risk premium is 7 percent.
What is the Treynor ratio of a portfolio comprised of 30 percent portfolio A, 20 percent portfolio B, and 50 percent portfolio C?
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Answer:
| (a) Portfolio | (b) Return | ( c) Beta | (d) Treynor ratio = Portfolio's return (b) - Risk free return (4.5%) / Portfolio' Beta ( c) | (e ) Investment | (f) Treynor ratio for the entire portfolio ( e * d) |
| A | 14.70% | 1.47 | 0.07 | 30% | 0.02 |
| B | 8.80% | 0.78 | 0.06 | 20% | 0.01 |
| C | 11.20% | 1.22 | 0.05 | 50% | 0.03 |
| Total (Answer) | 0.06 | ||||
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