A Portfolio Has an Average Return of 9

question 9

Multiple Choice

A portfolio has an average return of 9.7 percent,a standard deviation of 8.6 percent,and a beta of 0.72.The risk-free rate is 2.1 percent.What is the Treynor ratio?

• A) 0.098
• B) 0.106
• C) 0.121
• D) 0.636
• E) 0.884

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Definitions:

Standard Deviation

A statistical measure that quantifies the dispersion or spread of a set of data points or investment returns around their mean.

Risk-Free Rate

The theoretical rate of return of an investment with no risk of financial loss, often represented by the yield on government bonds.

Optimal Risky Portfolio

An investment portfolio that offers the highest expected return for a given level of risk or the lowest risk for a given level of expected return.

Beta

A measure of a security's volatility in relation to the overall market, indicating the security's risk compared to the market average.