Consider the following information for a mutual fund, the market index, and the

Question

Consider the following information for a mutual fund, the market index, and the risk-free rate. You also know that the return correlation between the fund and the market is .97.

What are the Sharpe and Treynor ratios for the fund? (Do not round intermediate calculations. Round your answers to 4 decimal places.)

Consider the following information for a mutual fund, the market index, and the risk-free rate. You also know that the return correlation between the fund and the market is .97.

year fund market risk-free 2008 -14.85% -29.5% 3% 2009 25.1 20.0 5 2010 12.9 10.9 2 2011 7.2 8.0 5 2012 -1.50 -3.2 3

What are the Sharpe and Treynor ratios for the fund? (Do not round intermediate calculations. Round your answers to 4 decimal places.)

Explanation / Answer

sharpe ratio = (average of fund - average of market)/standard deviation of (fund - market)

= (5.77 - 1.24)/6.032371 = 0.7509

Treynor ratio =  (average of fund - average of risk free rate)/beta of fund

beta of fund = covariance of fund with market/variance of market = 0.7607185

Treynor ratio = (5.77 - 3.6)/0.76071852 = 5.9549

year fund market risk-free Fund - market 2008 -14.85 -29.5 3 14.65 2009 25.1 20 5 5.1 2010 12.9 10.9 2 2 2011 7.2 8 5 -0.8 2012 -1.5 -3.2 3 1.7 Average= 5.77 1.24 3.6 Std dev of (fund - market) 6.03237101 variance= 363.903 Covariance= 276.82775 Beta = 0.76071852

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.