Statement III: Fund B has more benefits of diversification. Next, Anderson reviews quarterly holdings reports for Fund C. In comparing the two most recent quarterly reports, he notices Fund C executed a trade, which replaced a national bank stock with a regional bank stock. The regional bank stock is not a benchmark constituent.
2. What was the effect of Fund C’s trade on its active share and active risk?
A. Active share had a significant increase, active risk was not significantly affected.
B. Active risk had a significant increase, active share was not significantly affected.
C. Both active risk and active share increased significantly.
