The information ratio measures:

A Total return

B Active return (alpha) per unit of active risk (tracking error)

C Beta

D Sharpe ratio

✓ Correct Answer: Option B

Information ratio = Active Return / Tracking Error. It evaluates a managers skill relative to the benchmark.

💡 Why is B) the correct answer?

The correct answer to the question "The information ratio measures:" is Option B: Active return (alpha) per unit of active risk (tracking error).

The other options — A) Total return, C) Beta, D) Sharpe ratio — are incorrect for this CFA Exam Prep question. As explained above: Information ratio = Active Return / Tracking Error. It evaluates a managers skill relative to the benchmark.

📚 About This CFA Exam Prep Practice Question

This 3-level CFA Exam Prep question from the Portfolio Management topic is part of BrainForge Quiz's free exam preparation library. Each question includes the correct answer and a detailed explanation to help you understand the underlying concept, not just memorize the answer.

How to use this page: Read the question above, consider all four options (A through D), then check the highlighted correct answer and explanation. For active timed practice, start a free CFA Exam Prep practice test or use flashcards for spaced repetition review.

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The information ratio measures:

✓ Correct Answer: Option B

📚 About This CFA Exam Prep Practice Question

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