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:
Given these parameters, which of the following statements is correct?
A
The manager's average active return is below 2%, therefore the manager breached the limit.
B
The manager's average return in excess of the risk-free interest rate is below 2%, therefore the manager breached the limit.
C
The volatility of active returns achieved by the manager is below 2%, therefore the manager did not breach the limit.
D
The volatility of returns achieved by the manager is below 2%, therefore the manager did not breach the limit.