Enter the portfolio return , the benchmark return, and the tracking error into the Information Ratio Calculator. The calculator will evaluate and display the Information Ratio.

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## Information Ratio Formula

The following formula is used to calculate the Information Ratio.

**IR = (PR – BR) / TE**

- Where IR is the Information Ratio ( )
- PR is the portfolio return
- BR is the benchmark return
- TE is the tracking error

## How to Calculate Information Ratio?

The following example problems outline how to calculate Information Ratio.

**Example Problem #1**

- First, determine the portfolio return .
- The portfolio return is calculated to be : 5000.

- Next, determine the benchmark return.
- The benchmark return is measured to be: 3000.

- Next, determine the tracking error.
- The tracking error is found to be: .89.

- Finally, calculate the Information Ratio using the formula above:

IR = (PR – BR) / TE

The values given above are inserted into the equation below and the solution is calculated:

IR = (5000 – 3000) / .89 = 2247.19 ( )

**Example Problem #2**

The variables required for this problem are provided below:

portfolio return = 6000

benchmark return = 2000

tracking error = .90

Test your knowledge using the equation and check your answer with the calculator above.

IR = (PR – BR) / TE =** **( )