4. C is correct. Seyfried is correct in his response about the fundamental law. The law states that
the expected active return, E(RA), is the product of four key parameters: the transfer
coefficient, TC; the assumed information coefficient, IC; the square root of breadth, BR; and
portfolio active risk. Investors with higher IC will add more value over time. TC is lower for
constrained portfolios. Sections 4.1.- 4.3. LO.c.
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