if you are a mutual fund manager and you are given the below information:

nr obs

120

Portfolio 1

Portfolio 2

Active returns (bps)		-50.00	150.00
Tracking Error (bps)		80.00	200.00

1) Which portfolio would you choose? (Note: Mutual fund managers are looking for low Tracking error portfolios.)

Possible Answers: Portfolio1 or Portfolio 2 or Not enough info Yet

2) If you are a hedge fund manager which portfolio would you prefer?

3) Which portfolio has the highest alpha?

4) What is the t-statistics for portfolio 1 alpha?

3.29, 3, 1.51, 2

5) Which portfolio has the highest 99% monthly VaR?

6) What is the level of the general VaR for portfolio 2?

32.07, 6.52,9.32, not enough information to calculate