Question: In a particular year, a mutual fund earned its return by making the following investments Weight Return Bonds 20 % 5 % Stocks 80 %

In a particular year, a mutual fund earned its return by making the following investments

Weight

Return

Bonds

20

%

5

%

Stocks

80

%

0

%

A bogey portfolio earned its return by making the following investments:

Weight

Return

Bonds (Lehman Brothers Index)

50

%

5

%

Stocks (S&P 500 Index)

50

%

-1

%

  1. (3 points) What is the return of the mutual fund? What is the return of the bogey portfolio? Did the mutual fund outperform or underperform the bogey portfolio?

  1. (3 points) What is the contribution of asset allocation to the mutual funds underperformance or overperformance?

  1. (3 points) What is the contribution of security selection to the mutual funds underperformance or overperformance?

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