What is the Sharpe ratio, Treynor ratio, and Jensen’s alpha for each portfolio?

Question

What is the Sharpe ratio, Treynor ratio, and Jensen’s alpha for each portfolio? (Negative values should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations. Round your Sharpe ratio answers and Treynor ratio answers to 5 decimal places and Jensen's alpha answers to 2 decimal places. Omit the "%" sign in your response.)

Portfolio RP P P X 12 % 29 % 1.25   Y 11 24 1.10   Z 8 14 .75   Market 10 19 1.00   Risk-free 4 0 0

Explanation / Answer

Answer:

Sharpe ratio =  (Expected portfolio return Risk-free return)/Standard deviation of portfolio return

Treynor ratio = (Expected portfolio return Risk-free return)/Beta of portfolio

Jensen’s alpha = Expected portfolio return {Risk-free return + Beta of portfolio * (Market rate of return - Risk free return)}

Portfolio RP P Risk free return Sharpe Ratio X 12.00 29 4.00 0.27586 Y 11.00 24 4.00 0.29167 Z 8.00 14 4.00 0.28571

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