Question

A portfolio generates an annual return of 16%, a beta of 1.2, and a standard deviation...

A portfolio generates an annual return of 16%, a beta of 1.2, and a standard deviation of 19%. The market index return is 12% and has a standard deviation of 16%. What is the Sharpe measure of the portfolio and what is the Treynor measure of the portfolio if the risk-free rate is 6%? Explain the similarities and differences between the Sharpe ratio and Treynor measure. Also, explain the most appropriate application for each.

Paragraph

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Similarity between Sharpe ratio and Treynor ratio is that both measures tells us excess return per unit risk provided by portfolio

And the difference between both is that Sharpe measure use risk as standard deviation while Treynor measure use risk as beta .Standard deviation represent total risk while beta represents systematic or market risk .

Treynor measure is applied when we have well diversified portfolio because In case of well diversified portfolio,only Systematic risk is relevant While Sharpe measure is applied when portfolio is not well diversified and then total risk is required to be considered which is represented by standard deviation

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Please use the following information on the portfolio and its benchmark (S&P 500 index) to calculate...
Please use the following information on the portfolio and its benchmark (S&P 500 index) to calculate Portfolio S&P 500 Average Annual Return 12% 10% Standard Deviation 18% 15% Beta 1.2 1 Risk-free rate = 2% Sharpe ratio for the portfolio and S&P 500 index Treynor ratio for the portfolio and S&P 500 index Jensen’s alpha based on Capital Asset Pricing Model.
The expected return of stock A is 21% per year and the stock's annual standard deviation...
The expected return of stock A is 21% per year and the stock's annual standard deviation is 46%. There is also a risk-free asset. When a complete portfolio is formed with a portfolio weight on the risky asset of 36%, the expected return on the complete portfolio is 8.0%. 1. Compute the risk-free rate of return. 2. Compute the annual standard deviation of the complete portfolio above. 3. Compute the market price of risk using the Sharpe ratio?
The following table provides information about the portfolio performance of three investment managers: Manager Return Standard...
The following table provides information about the portfolio performance of three investment managers: Manager Return Standard Deviation Beta A 25% 22% 2.1 B 21% 19% 1.5 C 15% 10% 0.8 Market (M) 15% 12% Risk Free Rate = 5% Complete the following table: Manager Expected Return Sharpe Ratio Treynor Ratio Jensen’s Alpha A B C Rank
The following table provides information about the portfolio performance of three investment managers: Manager Return Standard...
The following table provides information about the portfolio performance of three investment managers: Manager Return Standard Deviation Beta A 25% 22% 2.1 B 21% 19% 1.5 C 15% 10% 0.8 Market (M) 15% 12% Risk Free Rate = 5% Complete the following table: Manager Expected Return Sharpe Ratio Treynor Ratio Jensen’s Alpha A B C Rank
The following table provides information about the portfolio performance of three investment managers: Manager Return Standard...
The following table provides information about the portfolio performance of three investment managers: Manager Return Standard Deviation Beta A 25% 22% 2.1 B 21% 19% 1.5 C 15% 10% 0.8 Market (M) 15% 12% Risk Free Rate = 5% Complete the following table: Manager Expected Return Sharpe Ratio Treynor Ratio Jensen’s Alpha A B C Rank
If the return on portfolio A is 10%, the market portfolio return is 12%, the inflation...
If the return on portfolio A is 10%, the market portfolio return is 12%, the inflation rate is 2%, the risk-free rate is 3%, the standard deviation of the return for portfolio A is 8% and the standard deviation of the return on the market portfolio is 14% and the beta of portfolio A is 0.6, the Treynor ratio for portfolio A will be 0.083. A. True B. False
Suppose the risk-free return is 4%. The beta of a managed portfolio is 1.2, the alpha...
Suppose the risk-free return is 4%. The beta of a managed portfolio is 1.2, the alpha is 1%, and the average return is 14%. Based on Jensen's measure of portfolio performance, you would calculate the return on the market portfolio as
The stock of a Company has a beta of 1.2 has a standard deviation of returns...
The stock of a Company has a beta of 1.2 has a standard deviation of returns of 25%. The market portfolio is expected to return 12% and the risk-free rate is 2%. If the market portfolio has a standard deviation of 15%, how much of the risk of XYZ stock is market risk and how much is non-market risk?
Last year your portfolio of small cap stocks produced a return of 32%. The S&P 500...
Last year your portfolio of small cap stocks produced a return of 32%. The S&P 500 had a return of 26% for the same period. Your portfolio had a beta of 2 and a standard deviation of 34%. The S&P had a standard deviation of 22% and the risk free rate was 8.0%. Calculate the Sharpe Ratio, Treynor Ratio, and Jensen’s Alpha for your portfolio. Discuss (in depth/be thorough) how your portfolio performed last year.
1.2. The risk-free rate is 6%, the expected return on the market portfolio is 14%, and...
1.2. The risk-free rate is 6%, the expected return on the market portfolio is 14%, and the standard deviation of the return on the market portfolio is 25%. Consider a portfolio with expected return of 16% and assume that it is on the efficient frontier. 1.2.1. Calculate the beta of this portfolio (4). 1.2.2. Calculate the standard deviation of its return (5).
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT