The average return, standard deviation, and beta for Fund A is given below along with data for the S&P 500 Index. Fund Average Return Standard Deviation Beta A 14% 24% 1.21 S&P 500 17.4% 19.4% 1 Risk-free 5.1% Calculate the Treynor measure of performance for the S&P 500.
Risk and return
Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.
Capital Asset Pricing Model
Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
The average return, standard deviation, and beta for Fund A is given below along with data for the S&P 500 Index.
| Fund | Average Return | Standard Deviation | Beta |
| A | 14% | 24% | 1.21 |
| S&P 500 | 17.4% | 19.4% | 1 |
| Risk-free | 5.1% |
Calculate the Treynor measure of performance for the S&P 500.
Convert percentages to decimal places before calculating your answer.
ENTER your answer using FOUR DECIMAL places.
Example: 1.2345
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