A Stock Has a Total Return of 16

question 108

Multiple Choice

A stock has a total return of 16.4%, a standard deviation of 14.5% and a beta of 1.63. The market rate of return is 12.4%, while the market's Treynor measure is 6.3. What is the value of the Treynor measure of this portfolio?

• A) 2.5%
• B) 6.3%
• C) 18.4%
• D) 27.6%

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Definitions:

Residual Income

The income that remains after deducting all required expenses and cost of capital from operating income.

Investment Centers

Segments within a company for which managers have responsibility over cost, revenue, and investment decisions.

Cost Center

A business segment whose manager has control over cost but has no control over revenue or investments in operating assets.

Responsibility Center

Any business segment whose manager has control over costs, revenues, or investments in operating assets.