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You are given the following information concerning three portfolios, the market portfolio, and the risk-free asset: Portfolio Rp σp βp X 11
You are given the following information concerning three portfolios, the market portfolio, and the risk-free asset:
| Portfolio | Rp | σp | βp | ||
| X | 11.50 | % | 38.00 | % | 1.70 |
| Y | 10.50 | 33.00 | 1.30 | ||
| Z | 7.20 | 23.00 | .85 | ||
| Market | 10.90 | 28.00 | 1.00 | ||
| Risk-free | 4.60 | 0 | 0 | ||
Assume that the tracking error of Portfolio X is 7.50 percent. What is the information ratio for Portfolio X? (
Expert Solution
IR=(Portfolio Return−Benchmark Return)/Tracking Error
=((11.5+10.5+7.2)/3 - 10.9)/7.5
= -1.17/7.5
= -0.156
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