Assume a second firm that evaluates portfolios uses the Treynor approach to measuring performance. The firm is also evaluating the three portfolios in problem 1. The portfolio betas are as follows:
a. Using the Treynor approach, how would the second firm rank the three portfolios? (Round to three places to the right of the decimal point.)
b. Explain why any differences have taken place in the rankings between problems 1 and 2a .
c. If the Treynor approach is utilized and the market return is 10 percent (with a risk-free rate of 7 percent), which of the portfolios outperformed the market? The market beta is always 1.

  • CreatedSeptember 21, 2015
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