Question

A portfolio manager generates a 10% rate of return on a "small cap" portfolio, compared to an 8% rate of return on the benchmark portfolio and a 6% rate of return on the Standard and Poor's 500 index over the same period. The active rate of return on the portfolio is:

Answer 1

2%

Step-by-step explanation:

Data provided in the question

Generated rate of return = 10%

The rate of return on the portfolio = 8%

The rate of return on the index = 6%

Based on the above information, the active rate of return is

= Generate rate of return - the rate of return on the portfolio

= 10% - 8%

= 2%

It shows the difference between the benchmarked portfolio and the generated rate of return and the same is applied