Question

You have been given the following return information for a mutual fund, the market index, and the risk-free rate. You also know that the return correlation between the fund and the market is 0.97.

Year	Fund		Market		Risk-Free
2011	–17.0	%	–33.5	%	2	%
2012	25.1		20.4		6
2013	13.3		12.1		2
2014	6.4		8.0		5
2015	–1.74		–3.2		3

What are the Sharpe and Treynor ratios for the fund? (Do not round intermediate calculations. Round your answers to 4 decimal places.)

Answer 1

Let us solve the question:

Trust the same will serve your purpose.

Should you need any clarifications, please feel free to comment.

The following are the date inputs in spreadsheet: Excess return over risk free rate Mutual Fund -17/100 25.1/100 13.3/100 6.4/100 -1.74/100 AVERAGE(B4:B8) EAVERAGE(C4:C8) EAVERAGE(D4:D8) EAVERAGE(E4:E8 Market Index -33.5/100 20.4/100 12.1/100 8/100 3.2/100 Risk free rate 2/100 6/100 2/100 5/100 3/100 Year 2011 2012 2013 2014 2015 Average Standard Deviation STDEV.S(B4:B8) ESTDEV.S(C4:C8 -B4-D4 B5-D5 -B6-D6 B7-D7 -B8-D8 STDEV.S(E4:E8 Sharpe Ratio for a Fund- Average of Excess return over risk free rate/Standard Deviation of excess return Average of Excess return over risk free rate Standard Deviation of excess return Sharpe Ratio -E9 -E10 EE13/E14 Treynor Ratio for a Fund- (Average fund return - Averaqe risk free rate) /Beta of fund Coorelation between the fund and the market Standard Deviation of the fund Standard Deviation of the market index 0.97 B10 -C10 -E18 E19 E20 -E20 E20 E21/E22 -B9 -D9 (E24-E25/E23 Covariance of Fund and Market (Correlation SD of Fund SD of Market Index Variance of Market (SD of Market IndexA2 Beta of the Fund -(Covariance/Variance Average mutual fund returns Average risk free returns Trevnor Ratio

The following are the obtained results in spreadsheet: Excess return over risk free rate -19.00% 19.10% 11.30% 1.40% -47 A% 1.61% 14.70% Mutual FundMarket Index Risk free rate Year 2011 2012 2013 2014 2015 Average Standard Deviation -17.00% 25.10% 13.30% 6.40% 1.74% 5.21% 15.84% -33.50% 20.40% 12.10% 8.00% -3.20% 076% 20.95% 2.00% 6.00% 2.00% 5.00% 3.00% 3.60% Sharpe Ratio for a Fund- Average of Excess return over risk free rate/Standard Deviation of excess return Average of Excess return over risk free rate Standard Deviation of excess return Sharpe Ratio 1.61% 14.70% 10.96% Treynor Ratio for a Fund- (Average fund return - Averaqe risk free rate) /Beta of fund Coorelation between the fund and the market Standard Deviation of the fund Standard Deviation of the market index 0.97 15.84% 20.95% 322% 4.39% 73.34% 5.21% 3.60% 2.20% Covariance of Fund and Market - (Correlation SD of Fund*SD of Market Index Variance of Market (SD of Market IndexA2 Beta of the Fund -(Covariance/Variance Average mutual fund returns Average risk free returns Trevnor Ratio