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:

ROA

Return on Assets, a financial ratio indicating the profitability of a company relative to its total assets.

ROA

Return on Assets, an indicator of how profitable a company is relative to its total assets, illustrating how efficiently a company is using its assets to generate earnings.

DSO

Days Sales Outstanding refers to the average period a company requires to receive payment following a sale.

Debt Ratio

A financial ratio that measures the extent of a company's or individual's leverage, calculated by dividing total liabilities by total assets.