CFA Level 1: AIMR-PPS Calculation of Returns

AIMR-PPS Calculation of Returns

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Question

Which of the following is/are required by AIMR-PPS with regards to calculation of returns?

I. Total return - realized and unrealized gains plus income - should be used.

II. Returns must be based on arithmetic mean calculations.

III. Accrual accounting must be used for fixed-income securities.

Answers

Explanations

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A. B. C. D.

Explanation

The PPS require that calculations be based on time-weighted (geometric) returns. Accrual accounting must be used for fixed-income and other securities that accrue income. The performance measurement must be based on total returns.

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