CFA Practice Question

There are 294 practice questions for this study session.

CFA Practice Question

Which measure is the maximum amount you should be willing to pay for an investment manager to manage your money?

A. Treynor ratio
B. M-squared
C. Jensen's Alpha
Correct Answer: C

User Contributed Comments 3

User Comment
Emily1119 Can anyone explain this question?
johntan1979 Jensen's Alpha measures the excess or abnormal return over the theoretical expected return. You shouldn't pay your fund manager more than this amount, logically-speaking.
ascruggs92 Jensen's Alpha measures excess return over the market. If a money manager charges you 1% but he only generates 0.5% alpha annualized, then his clients will end up under-performing after paying fees.
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