
Answer-first summary for fast verification
Answer: 2.4%.
Using the fundamental law of active management: Given: - IC = 0.12 - BR = 16 (number of benchmark securities) - Active Risk = 5.0% - TC = 1 (no constraints) Information Ratio (IR) = IC × √BR × TC = 0.12 × √16 × 1 = 0.12 × 4 = 0.48 Expected Active Return = IR × Active Risk = 0.48 × 5.0% = 2.4% Therefore, the expected active return is closest to 2.4%.
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A
2.4%.
B
6.9%.
C
9.6%.