The Treynor ratio differs from the Sharpe ratio by using:

A Standard deviation

B Beta (systematic risk) instead of total risk in the denominator

C Variance

D Alpha

✓ Correct Answer: Option B

Treynor ratio = (Rp − Rf) / βp. It measures return per unit of systematic risk, unlike Sharpe which uses total risk.

💡 Why is B) the correct answer?

The correct answer to the question "The Treynor ratio differs from the Sharpe ratio by using:" is Option B: Beta (systematic risk) instead of total risk in the denominator.

The other options — A) Standard deviation, C) Variance, D) Alpha — are incorrect for this CFA Exam Prep question. As explained above: Treynor ratio = (Rp − Rf) / βp. It measures return per unit of systematic risk, unlike Sharpe which uses total risk.

📚 About This CFA Exam Prep Practice Question

This 2-level CFA Exam Prep question from the Portfolio Management topic is part of BrainForge Quiz's free exam preparation library. Each question includes the correct answer and a detailed explanation to help you understand the underlying concept, not just memorize the answer.

How to use this page: Read the question above, consider all four options (A through D), then check the highlighted correct answer and explanation. For active timed practice, start a free CFA Exam Prep practice test or use flashcards for spaced repetition review.

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The Treynor ratio differs from the Sharpe ratio by using:

✓ Correct Answer: Option B

📚 About This CFA Exam Prep Practice Question

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