Question

In: Finance

If you are planning to allocate your wealth among a number of funds, in order to rank portfolios and choose among them, you would use

If you are planning to allocate your wealth among a number of funds, in order to rank portfolios and choose among them, you would use

a. Information Ratio

b. Treynor Ratio

c. Jensen's alpha

d. Sharp Ratio

Solutions

Expert Solution

The correct answer is Treynor ratio.

 

Explanation:

Treynor ratio is used evaluate the performance of a fund based on the systematic risk.

 

The ratio give the excess return earned by the portfolio over the risk free rate per unit of systematic risk.

 

When it comes to fully diversified mutual funds (unsystematic risk would be small due to diversification) the Treynor ratio would be the suitable method. This is because the Treynor method only measures the systematic risk.


The correct answer is Treynor ratio.

Related Solutions

Rank the image descriptions in the order that you would observe them if you were to...
Rank the image descriptions in the order that you would observe them if you were to move an object from very far away from a converging lens to very near it. Rank the image descriptions in the order you would observe them, starting with the object far from the lens and ending with the object very near the lens.
When would you choose to use containers in Windows and when would you choose to use...
When would you choose to use containers in Windows and when would you choose to use containers in Linux? How are they different? How are they similar?
If you are looking to maximize your return on equity, would you choose to use leverage...
If you are looking to maximize your return on equity, would you choose to use leverage (a loan) or not? Why?
1. Can we use benefit-cost analysis to choose among alternatives in allocating funds for building projects?...
1. Can we use benefit-cost analysis to choose among alternatives in allocating funds for building projects? 2. Is the net-investment test the only way to accurately predict project borrowing? need the answer without plagarism
Suppose you allocate all your wealth to “housing” and “savings”. Housing costs $40 per square foot....
Suppose you allocate all your wealth to “housing” and “savings”. Housing costs $40 per square foot. You have $100,000 in wealth and have elected to build a 1000 square foot house. Draw your budget line between housing (on the horizontal axis) and savings (on the vertical). Draw the indifference curve you are on. Now suppose the price of housing falls to $30 per square foot. (Do not forget that you already bought a 1000 square foot house!) Draw your new...
Suppose you allocate all your wealth to “housing” and “savings”. Housing costs $40 per square foot....
Suppose you allocate all your wealth to “housing” and “savings”. Housing costs $40 per square foot. You have $100,000 in wealth and have elected to build a 1000 square foot house. Draw your budget line between housing (on the horizontal axis) and savings (on the vertical). Draw the indifference curve you are on. Now suppose the price of housing falls to $30 per square foot. (Do not forget that you already bought a 1000 square foot house!) Draw your new...
Answer them please ASAP. Why would one choose the Hamiltonian Path and Satisfiability Problems in order...
Answer them please ASAP. Why would one choose the Hamiltonian Path and Satisfiability Problems in order to demonstrate the computational power of DNA computation?
1. Explain how you would rank the 5 C’s of credit analysis in order of importance...
1. Explain how you would rank the 5 C’s of credit analysis in order of importance and explain your rankings? 2. What are the most important covenants for creditors to include in loan agreements with borrowers and why? 3. There is a fundamental flaw in the credit rating agency process – the issuer of securities pays for the rating? How can this fundamental flaw be repaired going forward and why is that the best solution compared to other alternatives? 4....
choose the conversion approach you would use if the company purchased a new AIS. Explain your...
choose the conversion approach you would use if the company purchased a new AIS. Explain your choice, including the benefits. Discuss how you envision the testing process.
Which way would you prefer your company share their wealth? Why?
Which way would you prefer your company share their wealth? Why?
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT