Tracking Error Is Defined as

question 28

Multiple Choice

Tracking error is defined as

• A) the difference between the returns on the overall risky portfolio versus the benchmark return.
• B) the variance of the return of the benchmark portfolio.
• C) the variance of the return difference between the portfolio and the benchmark.
• D) the variance of the return of the actively-managed portfolio.

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Definitions:

Simple Interest

Simple interest is interest calculated only on the principal amount, or on that portion of the principal amount which remains unpaid.

Present Value

The present value of a sum of money or series of cash flows expected in the future, discounted at a certain rate of return.

Amortized Loan

A loan repaid in equal periodic amounts (or “killed off” over time).

Repayment Of Principal

The process of paying back the original amount borrowed in a loan, excluding any interest charges.