Question
Suppose you know the following information about two stocks: Stock Average Monthly Return Annualized Risk-Free Rate Beta A 1.1% 0.6% 1.2 B 1.4% 0.6% 1.1
Suppose you know the following information about two stocks:
Stock | Average Monthly Return | Annualized Risk-Free Rate | Beta |
---|---|---|---|
A | 1.1% | 0.6% | 1.2 |
B | 1.4% | 0.6% | 1.1 |
Based on the information in the table, which stock has a higher return?
Stock A
Stock B
Based on the information in the table, which stock has a higher level of risk?
Stock A
Stock B
There are several ways in which investors can measure a stocks risk. One is to examine the volatility of stock returns by using the Treynor index.
Based on the information in the table, the Treynor index for stock A is:
0.2083
0.4167
0.625
0.8333
Based on the information in the table, the Treynor index for stock B is:
0.4364
0.7273
0.9455
1.5273
Based on the Treynor ratios, which stock offers more expected excess return per unit of risk?
Stock A
Stock B
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