The following portfolios are b
Answer:
(A) Computation of Sharpe measure
Sharpe measure = (Return – Risk free return) / Standarddeviation
portfolio | calculation | sharpe measure |
P | (0.17-.007) / 0.6 | 1.667 |
Q | (0.19 – 0.07) / 0.07 | 1.7143 |
R | (0.11 – 0.07) / 0.04 | 1.000 |
S | (0.23 – 0.07 ) /0.10 | 1.600 |
Market | (0.14 – .07 ) / 0.05 | 1.400 |
(B) Computation of Treynor measure
Treynor’s measure = (Return – Risk free return) / Beta
portfolio | calculation | Treynor measure |
P | (0.17-.007) / 1.00 | 0.100 |
Q | (0.19 – 0.07) / 1.10 | 0.109 |
R | (0.11 – 0.07) / 0.70 | 0.057 |
S | (0.23 – 0.07 ) / 1.30 | 0.123 |
Market | (0.14 – .07 ) / 1.00 | 0.070 |
(C) Ranking of both measure
portfolio | sharpe measure | Rank |
P | 1.667 | 2 |
Q | 1.7143 | 1 |
R | 1.000 | 5 |
S | 1.600 | 3 |
Market | 1.400 | 4 |
portfolio | Treynor measure | Rank |
P | 0.100 | 3 |
Q | 0.109 | 2 |
R | 0.057 | 5 |
S | 0.123 | 1 |
Market | 0.070 | 4 |
As per sharpe measure best portfolio is Q and as per treynormeasure best portfolio is S.