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Financial Risk Manager Part 2

Financial Risk Manager Part 2

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Consider a large pension fund that operates under a tracking error limit of 2%. The recent performance metrics for the fund manager are as follows:

  • Average return: 2.8%
  • Volatility of returns: 1.9%
  • Average active return over the benchmark: 0.6%
  • Volatility of active returns: 1.7%
  • Current risk-free interest rate: 1.2%

Given these parameters, which of the following statements is correct?

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