NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Performance Measurement and Evaluation of Portfolio Managers
A PMS portfolio returned 13% with a beta of 0.8, with a risk-free rate of 5%. What is its Treynor ratio?
The Treynor ratio is 10. It equals the excess return over the risk-free rate (13% minus 5% = 8%) divided by the portfolio beta of 0.8, so it measures excess return per unit of systematic risk.
- A10.0Correct
- B16.25
- C1.60
- D8.0
Explanation
Treynor ratio = (Rp - Rf) / beta = (13 - 5) / 0.8 = 8 / 0.8 = 10. The 16.25 option divides 13 by 0.8 and ignores the risk-free rate. The 8.0 option omits division by beta.
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