The Treynor measure is calculated using the formula:

$T_p = \frac{E(R_p) - R_F}{\beta_p}$

Where:

• $E(R_p)$ = Expected return of the portfolio = 9%
• $R_F$ = Risk-free rate = 3%
• $\beta_p$ = Beta of the portfolio = 0.3

Substituting the values:

$T_p = \frac{9\% - 3\%}{0.3} = \frac{6\%}{0.3} = 0.20$

Therefore, the Treynor measure of portfolio LCM is 0.20.

Key Points:

• The Treynor measure evaluates risk-adjusted returns relative to systematic risk (beta)
• It measures excess return per unit of systematic risk
• Higher Treynor ratios indicate better risk-adjusted performance
• Unlike Sharpe ratio which uses total risk (standard deviation), Treynor uses only systematic risk (beta)