CFA Practice Question

There are 136 practice questions for this study session.

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 ______

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.

User Contributed Comments 0

You need to log in first to add your comment.