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P1.T1.403. Treynor, Sharpe, and alpha calculations

Nicole Seaman

Director of FRM Operations
Staff member
AIM: Calculate, compare, and evaluate the Treynor measure, the Sharpe measure, and Jensen's alpha.


403.1. Assume the slope of the security market line (SML) is 0.060 while the riskfree rate is 2.0%. What is the Treynor measure of a security with an alpha of 2.40% and beta of 0.30?

a. 0.140
b. 0.280
c. 0.560
d. 1.120

403.2. A portfolio with a volatility of 30.0% has a Treynor measure of 0.080. The portfolio has a correlation of 0.50 with the market index which itself has a volatility of 20.0%. What is the portfolio's Sharpe measure?

a. 0.095
b. 0.200
c. 0.330
d. 0.475

403.3. Assume the market index return is 8.0% while the risk-free rate is 3.0%. A portfolio with a volatility of 12.0% has a Sharpe measure of 0.50 and a Treynor measure of 0.20. What is the portfolio's alpha?

a. -2.79%
b. 1.16%
c. 3.83%
d. 4.50%

Answers here:


New Member
Hi Nicole,

I am not a paid member. I would like to give big thanks to you and David for giving us the access for the Today's Daily Questions section. It's a great help.But I am not getting the access for the answer link. Could you please help me out for this.
Thanks, Sofia

David Harper CFA FRM

David Harper CFA FRM
Staff member
Hi Sofia, thank you for liking the questions! You are not supposed to have access to the full Q&A , sorry: the lower forum nodes (including full Q&A threads) are protected for paid members. Thanks,