Exhibit 25.8
Use the Information Below for the Following Problem(S)
$$\begin{array}{l}
\text { Weights }\
\begin{array} { l l }
\text { Palic } & \text { Actural } \
\hline 50 \% \text { stacks } & 60 \% \text { stacks } \
50 \% \text { bands } & 4 [ 1 / \text { bands } \
\text { Returns } & \
\text { Index } & \text { Actural } \
\hline \text { 98 stocks } & 9 \% \text { stocks } \
5 \% \text { bonds } & 7 \% \text { bonds }
\end{array}
\end{array}$$
-Refer to Exhibit 25.8.Which of the following statements is true?
A) Sector/security selection hurt the portfolio performance; returns were 1.4% less than if the manager invested the funds in stocks and bond indexes.
B) Sector/security selection improved the port-folio performance by 1.4%; each sector return was higher than for index value.
C) Sector/security selection hurt the portfolio performance; returns were 6.8% less than if the manager invested the funds in stocks and bond indexes.
D) Sector/security selection improved the port-folio performance by 6.8%; each sector return was higher than for index return.
E) None of the above is a true statement.

Question

Exhibit 25.8
Use the Information Below for the Following Problem(S)
 $$\begin{array}{l}
\text { Weights }\
\begin{array} { l l } 
\text { Palic } & \text { Actural } \
\hline 50 \% \text { stacks } & 60 \% \text { stacks } \
50 \% \text { bands } & 4 [ 1 / \text { bands } \
\text { Returns } & \
\text { Index } & \text { Actural } \
\hline \text { 98 stocks } & 9 \% \text { stocks } \
5 \% \text { bonds } & 7 \% \text { bonds }
\end{array}
\end{array}$$
-Refer to Exhibit 25.8.Which of the following statements is true?
A) Sector/security selection hurt the portfolio performance; returns were 1.4% less than if the manager invested the funds in stocks and bond indexes.
B) Sector/security selection improved the port-folio performance by 1.4%; each sector return was higher than for index value.
C) Sector/security selection hurt the portfolio performance; returns were 6.8% less than if the manager invested the funds in stocks and bond indexes.
D) Sector/security selection improved the port-folio performance by 6.8%; each sector return was higher than for index return.
E) None of the above is a true statement.

Quizplus · Accepted Answer

Actual allocation,actual return = (.60)(9%)+ (.40)(7%)= 8.2%
Actual allocation,index return = (.60)(8%)+ (.40)(5%)= 6.8%
Sector/security selection improved the portfolio's performance by 1.4%; each sector return was higher than for index value.
Overall,the manager made a good allocation decision (which increased return by 0.3%)and a good sector/security selection (which increased returns by 1.4%).

Exhibit 25 -Refer to Exhibit 25