- CFA Exams
- CFA Level I Exam
- Study Session 17. Portfolio Management (2)
- Reading 47. Analysis of Active Portfolio Management
- Subject 3. The Fundamental Law of Active Management
CFA Practice Question
Based on the fundamental law of active management, if a portfolio manager has an information ratio of 0.6, an information coefficient of 0.2, and a breadth of 10, what is his or her transfer coefficient?
B. 0.55
C. 0.95
A. 0.3
B. 0.55
C. 0.95
Correct Answer: C
0.6 = 0.2 x TC x 101/2
TC = 0.95
IR = IC x TC x BR1/2
0.6 = 0.2 x TC x 101/2
TC = 0.95
User Contributed Comments 1
| User | Comment |
|---|---|
| davidt87 | As the notes says: E(Ra) = IC x TC x sqrt(BR) |