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.
$\begin{array}{cccc}\text { Period } & \text { Portfolio } & \text { Index } & \text { Difference } \\\hline 1 & 0.05 & 0.027 & 0.023 \\2 & -0.036 & -0.046 & 0.010 \\3 & 0.022 & 0.019 & 0.003 \\4 & 0.012 & 0.022 & -0.010 \\5 & -0.003 & -0.001 & -0.002 \\6 & -0.023 & -0.03 & 0.007 \\7 & 0.089 & 0.081 & 0.008 \\8 & -0.008 & 0.006 & -0.014 \\\text { Average } & & & 0.003 \\\text { SD } & & & 0.011789\end{array}$

The annualized tracking error for this period is

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

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Definitions:

Performance Measures

Quantitative or qualitative indicators used to evaluate and track the efficiency, productivity, or success of an individual, team, or organization's outputs.

Deficient

Lacking in some necessary quality or element; insufficient or inadequate.

Contaminated

Refers to substances that are impure or polluted, often posing a risk to health or the environment.

Performance-Based Pay

A compensation strategy that ties a portion of an employee's pay directly to their performance or achievements, incentivizing high performance.