Equity Epsilon Topic test - Question 2

I feel this has got to be wrong. Can somebody take a look at the 2nd question.

Active return = Ra = Sum (BETAportfolio - BETAbenchmark) * Fk + (alpha + e)

Question asks for the average monthly return of the Fraser Fund that is unexplained by rewarded factors.

They solve for (Alpha) but they don’t include any of the benchmark numbers. They solve using:

Alpha = Ra - Sum (BETAportfolio) * Fk

And that’s it. How can that be correct?

Thanks

To further elaborate:

Why are we not using equation 2 from page 447 of the text?

The last (alpha + e) is the part of return not explained by rewarded factors (what this question is asking for).

I would have solved like this

(alpha + e) = Return unexplained by rewarded factors = Ra - SUM (BETAportfolio- BETAbenchmark ) * Fk

for this question this equals

= 55 - [(.91 - . 90 )*.61 + (.15 - ( -.27 ))*.17 + (.60 - .38) * .18 + ( .08 - .15 ) * .72]

The answer did NOT include any of the bolded numbers which are the beta of the benchmarks from equation 2 on page 447???

Why is that? I actually think this is incorrect on the topic test.

Thanks again

Anybody on this? People are asking on the CFA site as well and there’s no good answer. Thanks

Seems weird.

I suggest e-mailing CFA Institute (info@cfainstitute.org) and asking them.

Anybody has any input on this?

I run into this question today and get confused but it seems like nobody has answer yet.
Return from unrewarded factors = Actual monthly performance – Return from rewarded factors.
Since they clearly stated that 0.55% is the monthly performance in excess of the risk-free rate, should the actual monthly performance is 0.55% + 0.33% (risk free rate) = 0.88% ???
Thus the correct answer for this question is C which is 0.88% - 0.75% = 0.13% (answer C)
0.75% = Return from rewarded factors = (0.91 × 0.61%) + (0.15 × 0.17%) + (0.60 × 0.18%) + (0.08 × 0.72%)
This is exactly what they did to calculate the return from factors. I just cannot get why they took 0.55% minus 0.75%.
Am I missing something ?