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Category > Business & Finance Posted 07 Jun 2017 My Price 11.00

CFA Examination Level II

CFA Examination Level II

An analyst wants to evaluate Portfolio X, consisting entirely of U.S. common stocks, using both the Treynor and Sharpe measures of portfolio performance. The following table provides the average annual rate of return for Portfolio X, the market portfolio (as measured by the Standard and Poor’s 500 Index), and U.S. Treasury bills (T-bills) during the past eight years.

Annual Average
Rate of Return

Standard Deviation
of Return

Beta

Portfolio X

10%

18%

0.6

S&P 500

12

13

1

T-bills

6

n/a

n/a

a. Calculate both the Treynor measure and the Sharpe measure for both Portfolio X and the S&P 500. Briefly explain whether Portfolio X underperformed, equaled, or outperformed the S&P 500 on a risk-adjusted basis using both the Treynor measure and the Sharpe measure.

 

b. Based on the performance of Portfolio X relative to the S&P 500 calculated in Part a, briefly explain the reason for the conflicting results when using the Treynor measure versus the Sharpe measure.

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Status NEW Posted 07 Jun 2017 07:06 AM My Price 11.00

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