Question 1:
Bernoulli trial: Prob(answering True by guessing = T) = 1/5 = 0.2
Prob (answering False = F) = 1-P(T) = 4/5 = 0.8
Now we enter binomial dist with 10 i. i. d. (Bernoulli) questions
We need probability of passing the exam, which is answering at least 3 questions correctly. That is...
So, in case of active return/active risk we are comparing manager's portfolio return/risk vis-a-vis the benchmark return/risk. And in case of residual return, we are comparing manager's portfolio return with the return as per CAPM. However, what will be the residual risk?
Hi,
W.r.t information ratio, what would be the difference between the active return & residual return and active risk & residual risk? How are these measured?
Thanks.
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