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	–22.4	%	–42.5	%	3	%
2012	25.1		21.3		5
2013	14.2		14.8		2
2014	6.6		8.8		6
2015	–2.28		–5.2		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

Year	Fund	market	risk free
2011	-22.4	-42.5	3
2012	25.1	21.3	5
2013	14.2	14.8	2
2014	6.6	8.8	6
2015	2.28	-5.2	3
Mean	5.156	-0.56	3.8
Standard Deviation	17.67234	25.40616
Correlation between fund and market		0.97
Beta		0.654483
Sharpe Ratio	= (5.156 - 3.8)/17.67234 =			0.07673
Treynor's Ratio	= (5.156 - 3.8)/0.654483 =			2.071864
Note: The above ratios have been calculated based on average returns of fund and market and
average risk free rate over the period of five years from 2011 to 2015