Consider the following information concerning three portfolios, the market portf
ID: 2762772 • Letter: C
Question
Consider the following information concerning three portfolios, the market portfolio, and the risk-free asset: Portfolio RP P P X 15.5 % 37 % 1.65 Y 14.5 32 1.30 Z 8.2 22 .80 Market 10.8 27 1.00 Risk-free 6.4 0 0 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 Sharpe Ratio Treynor Ratio Jensen's Alpha X % Y % Z % Market %
Explanation / Answer
Solution :
Portfolio
Sharpe Ratio
Treynor Ratio
Jensen's Alpha
X
0.24595
5.51515
1.84
Y
0.25313
6.23077
2.38
Z
0.08182
2.25000
-1.72
Market
0.16296
4.40000
0
Formula
calculation for X
answer
Sharp ratio = (RP - risk free return)/Standard deviation
0.245945946
0.24595
Treynor ratio = (RP - risk free return)/beta
5.515151515
5.51515
Jensen's Alpha =RP - (risk free return+beta*(market return-risk free return))
15.5-(6.4+1.65*(10.8-6.4))
1.84
Portfolio
Sharpe Ratio
Treynor Ratio
Jensen's Alpha
X
0.24595
5.51515
1.84
Y
0.25313
6.23077
2.38
Z
0.08182
2.25000
-1.72
Market
0.16296
4.40000
0
Formula
calculation for X
answer
Sharp ratio = (RP - risk free return)/Standard deviation
0.245945946
0.24595
Treynor ratio = (RP - risk free return)/beta
5.515151515
5.51515
Jensen's Alpha =RP - (risk free return+beta*(market return-risk free return))
15.5-(6.4+1.65*(10.8-6.4))
1.84
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