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The following portfolios are being considered for investment. During the period under consideration, RFR = 0.08. Port...

The following portfolios are being considered for investment. During the period under consideration, RFR = 0.08.

Portfolio Return Beta σi
P 0.15 1.00 0.06
Q 0.17 1.10 0.07
R 0.11 0.50 0.04
S 0.21 1.40 0.12
Market 0.13 1.00 0.05

A. Compute the Sharpe measure for each portfolio and the market portfolio. Round your answers to three decimal places.

  1. Portfolio Sharpe measure
    P
    Q
    R
    S
    Market

B. Compute the Treynor measure for each portfolio and the market portfolio. Round your answers to three decimal places.

  1. Portfolio Treynor measure
    P
    Q
    R
    S
    Market

    C. Rank the portfolios using each measure, explaining the cause for any differences you find in the rankings

    Portfolio Rank (Sharpe measure) Rank (Treynor measure)
    P
    Q
    R
    S
    Market
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Answer #1
Sharpe Ratio = (Portfolio Return - Risk free Return)/Standard Deviation of portfolio
a. Portfolio Sharpe measure
P 1.16666667
Q 1.28571429
R 0.75
S 1.08333333
Market 1
Treynor Measure = (Portfolio Return - Risk free Return)/Beta of Portfolio
a. Portfolio Treynor Measure
P 0.07
Q 0.08181818
R 0.06
S 0.09285714
Market 0.05
Higher the sharpe ratio, better it is
Higher the Treynor Ratio, better it is

a. ortfolio

 Rank (Sharpe measure) Rank (Treynor measure)
P 2 3
Q 1 2
R 5 4
S 3 1
Market 4 5
0 0
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