5. B is correct. BR is lower than the number of securities if their returns are positively
correlated. Although increasing the rebalancing frequency may increase the information
ratio, it will do so if the sequential active management decisions remain independent. An
unconstrained IR is invariant to the level of active risk, however the IR for a constrained
portfolio generally decreases with the aggressiveness of the strategy. Section 5. LO.f.
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