Question 1
Fred's Frankfurters has an expected return of 18.9%. The market has an expected return of 13.5%. If the risk free rate is 5%, calculate the Treynor Index. (Round to two decimal places)
◦ 13.90%
◦ 5.40%
◦ 5.18%
◦ 8.48%
◦ 7.50%
Question 2
George Soros wants to pick a Canadian stock for his International Diversified Hedge Fund. The fund has holdings in every country with a stock market. With reference to the data in the following table, which stock is best for his portfolio and why?
◦ Stock B because it has a higher return
◦ Stock A because it has more return per unit of standard deviation
◦ Stock B because it has more excess return per unit standard deviation
◦ Stock B because it has more excess return per unit systematic risk
◦ Stock A because it has a lower Beta
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