The Table Below Provides Returns on a Portfolio Along with Returns

question 35

Multiple Choice

The table below provides returns on a portfolio along with returns for the corresponding benchmark index for the past eight quarters. The table also provides the difference between portfolio returns and the benchmark index, the average of these differences over the past eight quarters and the standard deviation of these differences. $\begin{array}{cccc}\text { Period } & \text { Portfolio } & \text { Index } & \text { Difference } \\\hline 1 & 0.05 & 0.027 & 0.023 \\2 & -0.036 & -0.046 & 0.010 \\3 & 0.022 & 0.019 & 0.003 \\4 & 0.012 & 0.022 & -0.010 \\5 & -0.003 & -0.001 & -0.002 \\6 & -0.023 & -0.03 & 0.007 \\7 & 0.089 & 0.081 & 0.008 \\8 & -0.008 & 0.006 & -0.014\\\\\text { Average } &&& 0.003 \\\mathrm{SD} &&& 0.011789\end{array}$ The annualized tracking error for this period is

• A)2.36%
• B)4.08%
• C)2.89%
• D)3.33%
• E)1.18%

Perform break-even analysis on investments after experiencing gains and losses.

Understand how to calculate income yield from an investment.

Understand how to calculate capital gain yield from an investment.

Understand how to calculate the total rate of return from an investment.

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Definitions:

Variable Costing

An accounting method that considers only variable production costs (materials, labor, and overhead) in the cost of goods sold and excludes fixed costs.

Operating Loss

This occurs when a company's operating expenses exceed its gross profits, indicating that the business operations are not profitable.

Year 1

Indicates the first year of a specific period of time, operation, or accounting period, setting the baseline for subsequent years.

Net Operating Income

The profit a company makes from its core business operations, excluding deductions of interest and taxes.