The risk-free rate is the return on U.S Treasury Bills, in this case, 2%. From published reports, the Beta for Fund A is 1.25, and Beta for Fund B is 0.8. From this information, the Treynor Ratio computation is as follows. Treynor Ratio for Fund A = .08 - .02 / 1.25 = 0.048. Treynor Ratio for Fund B = .06 - .02 / .8 = 0.050.
filexlib. The appropriate measure of a security's risk is how much adding a little more of that security to the aggregate portfolio of all assets (the market portfolio) increases the risk of that portfolio. It turns that that this incremental risk can be measured simply as the security's `beta' with the market portfolio. Treynor's
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