Chartered Financial Analyst Level 2

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Explanation:

Using the fundamental law of active management:

Given:

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%.

Explanation:

Using the fundamental law of active management:

Given:

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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