Q.204 A 10-year research on 3 distinct portfolios and the market reveals the following information: | Portfolio | Average Annual Return | Standard Deviation | Beta | |-----------|------------------------|--------------------|------| | 1 | 14% | 21 | 1.15 | | 2 | 16% | 24 | 1.00 | | 3 | 20% | 28 | 1.25 | | S&P500 | 12% | 20 | | If the risk-free rate is 6%, then use the Treynor measure to rank the portfolios from the lowest to the highest. | Financial Risk Manager Part 1 Quiz - LeetQuiz

Explanation:

The Treynor measure of a portfolio is calculated as:

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

Calculating the Treynor measure for each portfolio given $R_f = 6\%$ :

Portfolio 1: $T_1 = \frac{14\% - 6\%}{1.15} = \frac{8\%}{1.15} \approx 6.96\%$
Portfolio 2: $T_2 = \frac{16\% - 6\%}{1.00} = \frac{10\%}{1.00} = 10.00\%$
Portfolio 3: $T_3 = \frac{20\% - 6\%}{1.25} = \frac{14\%}{1.25} = 11.20\%$

Ranking the portfolios from the lowest to the highest Treynor measure yields: 1, 2, 3.

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Q.204 A 10-year research on 3 distinct portfolios and the market reveals the following information:

Portfolio Average Annual Return Standard Deviation Beta
1 14% 21 1.15
2 16% 24 1.00
3 20% 28 1.25
S&P500 12% 20

If the risk-free rate is 6%, then use the Treynor measure to rank the portfolios from the lowest to the highest.

Portfolio	Average Annual Return	Standard Deviation	Beta
1	14%	21	1.15
2	16%	24	1.00
3	20%	28	1.25
S&P500	12%	20

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KKoray Nedim

Last updated: June 10, 2026 at 23:59

1, 2, 3

2, 3, 1

3, 2, 1

1, 3, 2

Financial Risk Manager Part 1

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