Lets assume you have a portfolio generating 10% return (a standard deviation of 4% and beta of 1

Accounting May 19, 2021

Lets assume you have a portfolio generating 10% return (a standard deviation of 4% and beta of 1.5) this year. And you wonder whether your portfolio performance is good and would like to compare it with an estimate from CML (Capital Market Line). Currently 10 year Treasury bond produces 5% YTM (yield to maturity), a market portfolio (Rm, efficient portfolio) shows an annual return of 12% and a standard deviation of 3%. Using this information, please answer the next 4 questions.

Estimate an expected return with CML?
Estimate Sharpe’s ratio?
Estimate Treynor’s ratio?

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