CFA Level I · CFA Level I Exam · Benchmarking Returns
A portfolio returned 8.5% over the year while its benchmark returned 7.2%. The active return of the portfolio is most likely:
The active return is 1.3%. It is calculated by subtracting the benchmark return of 7.2% from the portfolio return of 8.5%. A positive result means the portfolio outperformed its benchmark over the year.
- A-1.3%
- B1.3%Correct
- C15.7%
Explanation
Active return is portfolio return minus benchmark return: 8.5% - 7.2% = 1.3%. The -1.3% option reverses the subtraction. The 15.7% option adds the two returns.
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