- CFA Exams
- CFA Level I Exam
- Topic 9. Portfolio Management
- Learning Module 38. Analysis of Active Portfolio Management
- Subject 2. Comparing Risk and Return
CFA Practice Question
Assume the active risk of a fund is 4%. If you combine the fund in a 75/25 mix with the benchmark portfolio, the active risk of the combined portfolio will ______
B. become 3%.
C. It is hard to tell.
A. remain at 4%.
B. become 3%.
C. It is hard to tell.
Correct Answer: B
4% x 75% = 3%
The active return will have a proportional reduction, leaving the information ratio unchanged.
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