A Portfolio Has an Average Return of 14 Percent, a Standard

question 47

Multiple Choice

A portfolio has an average return of 14 percent, a standard deviation of 27 percent, and a beta of 1.15. The risk-free rate is 4.5 percent, and the expected return of the market is 12 percent. What is the Treynor ratio for the portfolio?

• A) 0.0741
• B) 0.0943
• C) 0.0782
• D) 0.0918
• E) 0.0826

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Definitions:

Progressive Income Tax

A tax system in which the tax rate increases as the taxable amount increases, leading to higher earners paying a higher rate of tax on their income.

Equity

The concept of fairness or justice in the allocation of resources or treatment of individuals, or a term referring to ownership interest in a company through stocks.

Efficiency

The state of optimizing resources to achieve the highest possible output with the least waste of inputs.

Tax Efficiency

A measure of how much of an investment's return is left after taxes, indicating the effectiveness of minimizing tax liability through investment choices.