Explanation:
The Treynor Performance Index (TPI), also known as the Treynor Ratio, measures the risk-adjusted return of a portfolio considering its systematic risk (beta). To calculate the Treynor Ratio, use the following formula:
where:
= Expected return of the portfolio
= Risk-free rate
= Beta of the portfolio
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Q.5317 What is the Treynor Performance Index of a portfolio, given its expected return of 7.7%, volatility of 17%, beta of 0.4, and a risk-free rate of 2.5%, as calculated by an investment performance analyst?
A
0.305
B
0.052
C
0.13
D
3.72
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