Question: USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM Weights Policy Actual 50% stocks 60% stocks 50% bonds 40% bonds Returns Index Actual 8% stocks 9%

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM

Weights
Policy	Actual
50% stocks	60% stocks
50% bonds	40% bonds

Returns
Index	Actual
8% stocks	9% stocks
5% bonds	7% bonds

Refer to Exhibit 18.11. 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 6.8%; each sector return was higher than for index return.

c. Sector/security selection improved the port-folio performance by 1.4%; each sector return was higher than for index value.

d. Sector/security selection hurt the portfolio performance; returns were 6.8% less than if the manager invested the funds in stocks and bond indexes.

e. None of these choices are correct.

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