Question

A fund has a Beta of 1.25, Standard Deviation of 7%, and an expected return of 12%. If the risk free rate is 2%, calculate the Treynor Index.

Answer 1

the Treynor Index is 0.08

Step-by-step explanation:

The computation of the Treynor Index is shown below:

We know that

Treynor Index is

= (Portfolio return - risk free rate of return) ÷ beta

= (12% - 2%) ÷ 1.25

= 0.08

Hence, the Treynor Index is 0.08

Basically the above formula should be applied for the same