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NISM Certifications · NISM-Series-V-A: Mutual Fund Distributors · Mutual Fund Scheme Performance

A scheme returned 14%, the risk-free rate is 6%, and the scheme's standard deviation is 10%. Its beta is 0.8 and the market return is 12%. What are the Sharpe ratio and Treynor ratio respectively?

Sharpe ratio is 0.80 and Treynor ratio is 10.00. Both use the excess return of 8% over the risk-free rate; Sharpe divides by standard deviation of 10, while Treynor divides by beta of 0.8. The market return is irrelevant here.

  1. A0.80 and 10.00Correct
  2. B1.40 and 7.50
  3. C0.80 and 7.50
  4. D0.80 and 12.50

Explanation

Excess return = 14 - 6 = 8. Sharpe = 8/10 = 0.80. Treynor = 8/0.8 = 10.00. Option with 7.50 wrongly uses a different divisor, and 12.50 divides by 0.64. The market return is not needed for either ratio.

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