The Sharpe ratio is a measure of risk-adjusted return, which helps investors understand the return of an investment compared to its risk. The ratio is the average return earned in excess of the risk-free rate per unit of volatility or total risk. In the context of Mr. Cook's assets, the Sharpe measure would be more relevant because it takes into account the total risk - both systematic and unsystematic risks. This is important because Mr. Cook's securities portfolio, which constitutes the major proportion of his assets, is undiversified. This means it is exposed to both types of risks. Therefore, the Sharpe measure would provide a more comprehensive assessment of the risk and return of his portfolio. Furthermore, as a retired surgeon, Mr. Cook would be interested in the safety of both income and principal, regardless of the source of volatility. The Sharpe measure, by considering both systematic and unsystematic risks, would provide a more accurate measure of the total risk to his income and principal.

Choice A is incorrect. The Treynor measure is not the most relevant for Mr. Cook's situation because it only considers systematic risk, which is more applicable to well-diversified portfolios. Mr. Cook's portfolio, however, is not diversified.

Choice B is incorrect. While it might seem logical to use the Treynor measure for the portfolio and the Sharpe measure for other assets, this approach would be inappropriate given that Mr. Cook's securities portfolio isn't diversified and therefore contains unsystematic risk which isn't captured by the Treynor measure.

Choice D is incorrect. It suggests that neither of these measures would be relevant in assessing the risk and return of his investments which isn't true as Sharpe ratio can provide a useful assessment of his investment's performance on a risk-adjusted basis.

Things to Remember

• The Treynor measure is a ratio that evaluates the risk-adjusted performance of an investment portfolio by taking into account only systematic risk, also known as market risk.