A Portfolio Has a Treynor Ratio of 0

question 77

Multiple Choice

A portfolio has a Treynor ratio of 0.070,a standard deviation of 16.40 percent,a beta of 1.16,and an expected return of 14.3 percent.What is the risk-free rate?

• A) 1.32 percent
• B) 5.21 percent
• C) 5.39 percent
• D) 6.18 percent
• E) 6.41 percent

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Definitions:

NPV

Net Present Value (NPV) is a financial metric that calculates the difference between the present value of cash inflows and outflows over a period of time.

Present Value

The today's worth of a future sum or cash flows series, based on a predetermined rate of return.

Cash Inflows

Refers to the money coming into a company, typically from operations, investments, and financing activities.

NPV Zero

A situation where the net present value of a project or investment is zero, indicating that the projected earnings are exactly equal to the initial investment.