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Explanation:
Information Ratio =
Alpha = Return on the portfolio − Return on the benchmark
Alpha =
Alpha = 3%
Information Ratio =
= 0.75
Note that,
IR =
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Q.2755 A portfolio manager invested $1 million in a portfolio of equities. At that time the benchmark index against which the performance of the portfolio was to be tracked stood at 2000 points. One year later the value of the portfolio was $1.12 million while the benchmark index was 2180 points. Calculate the information ratio for the portfolio if the tracking error is 4%.
A
0.75
B
0.6
C
0.83
D
1.0