A number of risk-adjusted, market-adjusted rate of return measures are available for use in assessing unit trust performance. Sharpe's measure, Treynor measure and Jensen's measure.
Which of the following statements correctly describe(s) the above measures?
I. Jensen's measure uses the portfolio beta and CAPM to calculate its excess return, which may be positive, zero or negative.
II. Treynor's measure measures the risk premium per unit of diversifiable risk, which is measured by the portfolio beta.
III. Sharpe's measure measures the risk premium per unit of nondiversifiable risk, which is measured by the portfolio standard deviation of return.
IV. Treynor's measure measures the risk premium per unit of nondiversifiable risk, which is measured by the portfolio standard deviation of return.
A. I
B. II, III
