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

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.
A . I, II and III
B . I only
C . I and III only
D . II and III only

View Answer

Answer: C

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.