The correct answer is B.

To compute the modified benchmark-neutral alpha, we need to subtract the product of the active position's beta and the benchmark's alpha from the active position's alpha. This effectively neutralizes the beta component from the alpha of the active position.

$\text{Benchmark-neutral alpha} = \alpha_{\text{active}} - (\beta_{\text{active}} \times \alpha_{\text{benchmark}})$

Given:

• Active position alpha ($\alpha_{\text{active}}$) = 0.6%
• Active position beta ($\beta_{\text{active}}$) = 1.3
• Benchmark alpha ($\alpha_{\text{benchmark}}$) = 0.020%

$\text{Benchmark-neutral alpha} = 0.6\% - (1.3 \times 0.020\%) = 0.6\% - 0.026\% = 0.574\%$

Rounding to two decimal places, the modified benchmark-neutral alpha is 0.57%.