Question

The following data are available relating to the performance of Monarch Stock Fund and the market portfolio: Monarch Market Portfolio Average return 16% 12% Standard deviations of returns 26% 22% Beta 1.15 1.00 Residual standard deviation 1% 0% The risk-free return during the sample period was 4%. Calculate Treynor's measure of performance for Monarch Stock Fund.a. 1.00% b. 2.80% c. 44.00% d. 50.00%

Answer 1

Answer:

b. 2.80%

Explanation:

Calculation for the measure of performance for Monarch Stock Fund

Using this formula

Measure of performance= Monarch Average return-[risk-free return+ Monarch Beta (Market Portfolio Average return-risk-free return)]

Let plug in the formula

Measure of performance=16% - [4% + 1.15 (12% - 4%)]

Measure of performance=2.80%

Therefore the measure of performance for Monarch Stock Fund will be 2.80%