Q1a)

A client asks a portfolio manager about the technique his company uses to create index-tracking equity portfolios. The portfolio manager replies that when tracking an index with a large number of constituents and/or managing a relatively low level of assets, a relatively straightforward and technically unsophisticated method is used to build a passive portfolio that requires fewer individual securities than the index and reduces brokerage commission costs. This portfolio construction method is most likely:

-blended.

-stratified sampling.

-full replication.

-optimisation.

Q1b)

The Remle Fund selects investments to track the S&P 500 Index and minimises trading based on the assumption that markets are efficient. The funds management strategy is:

-indeterminate based on the information given.

-blended.

-passive.

-active.