- CFA Exams
- CFA Level I Exam
- Study Session 17. Portfolio Management (2)
- Reading 47. Analysis of Active Portfolio Management
- Subject 4. Applications of the Fundamental Law
CFA Practice Question
Here is information about an equity fund:

If active risk is increased to 6%, the expected return will ______
A. double, leaving the information ratio the same.
B. remain the same.
C. increase, but not as much as by 100%.
Explanation: The transfer coefficient is 1. This is an unconstrained portfolio. The expected active return will increase proportionally by 100%.
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