Asked by
shayla Kantarevic
on Dec 08, 2024
Verified
In a particular year, Hoosier Mutual Fund earned a return of 1% by making the following investments in asset classes: Weight Return Bonds 20%5% Stocks 80%0%\begin{array}{cc}& \text { Weight } & \text { Return }\\ \text { Bonds } &20\%&5\%\\ \text { Stocks } &80\%&0\%\\\end{array} Bonds Stocks Weight 20%80% Return 5%0%
The return on a bogey portfolio was 2%, calculated from the following information.
Weight Return Bonds (Lehman Brother Index) 50%5% Stacks (S&P 500 Index) 50%−1%\begin{array}{cc}& \text { Weight } & \text { Return }\\ \text { Bonds (Lehman Brother Index) } &50\%&5\%\\ \text { Stacks (S\&P 500 Index) } &50\%&-1\%\\\end{array} Bonds (Lehman Brother Index) Stacks (S&P 500 Index) Weight 50%50% Return 5%−1%
The contribution of asset allocation across markets to the Hoosier Fund's total abnormal return was
A) 1.80%.
B) 1.00%
C) 0.80%.
D) 1.00%.
Asset Allocation
The strategic division of an investment portfolio across various asset classes, such as stocks, bonds, and cash, to optimize returns and manage risk.
Abnormal Return
A return on an investment that deviates from the expected normal or benchmark return.
Bogey Portfolio
A benchmark portfolio against which the performance of an investment portfolio can be measured, often used in fund management.
- Grasp the significance of asset allocation and selection across markets on the total extraordinary return of an investment.
- Assess the influence of asset allocation and security selection on the performance of investment funds.
Verified Answer
EO
Learning Objectives
- Grasp the significance of asset allocation and selection across markets on the total extraordinary return of an investment.
- Assess the influence of asset allocation and security selection on the performance of investment funds.