Answer: 0.20

The Treynor measure is a performance metric used to evaluate the risk-adjusted excess return of a portfolio over the risk-free rate. It is calculated using the formula: \[ Tp = \frac{E(Rp) - RF}{\beta_p} \] where \( E(Rp) \) is the expected return of the portfolio, \( RF \) is the risk-free rate, and \( \beta_p \) is the beta of the portfolio. In the provided file content, the Treynor measure for portfolio LCM is calculated as follows: - The expected return of portfolio LCM is 9% (or 0.09 as a decimal). - The risk-free rate is 3% (or 0.03 as a decimal). - The beta of portfolio LCM is 0.3. Plugging these values into the Treynor measure formula gives: \[ Tp = \frac{0.09 - 0.03}{0.3} = \frac{0.06}{0.3} = 0.20 \] Thus, the Treynor measure for portfolio LCM is 0.20, which corresponds to option C in the multiple-choice question. This measure indicates that for every unit of market risk taken on by the portfolio, it generates a 20% excess return over the risk-free rate.

Author: LeetQuiz Editorial Team