NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Portfolio Management Process
Over a year a PMS portfolio returned 14% while its benchmark returned 11%. The portfolio's beta relative to the benchmark was 1.0. What is the excess return over the benchmark?
The excess return is 3 percentage points, found by subtracting the benchmark return of 11% from the portfolio return of 14%. A positive figure means the portfolio manager outperformed the benchmark over the period.
- A25%
- B3%Correct
- C14%
- D-3%
Explanation
Excess return = portfolio return - benchmark return = 14% - 11% = 3%. The -3% option reverses the sign. 25% adds the two returns.
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