CFA Practice Question

There are 410 practice questions for this study session.

CFA Practice Question

You are examining a portfolio composed of 33% money-market investments, 9.5% bonds, and 57.5% stocks. Last year, the return on the money-market investments was 4%, the return on bonds was 9%, and the return on stocks was -11%. What is the contribution of stocks toward the portfolio weighted average return?
A. -57.50%
B. -11.00%
C. -6.325%
Explanation: The portfolio weighted average mean return is equal to the sum (as i goes from 1 to n) of w_i * X_i, where w_i is the percentage weight in the portfolio of the ith asset, and X_i is the investment return of the ith asset. The contribution of any asset will equal its weight in the portfolio multiplied by its return. Here, we get 0.575 * - 0.11 = -6.325%.

User Contributed Comments 5

User Comment
danlan Calculate the absoulte contribution and not the relative contribution.
jml115 i don't get this problem. i get 4.15% = (0.33*0.04) + (0.095*0.09) + (0.575*-0.11)
mc25456 What is the contribution of STOCKS toward the portfolio weighted average return?
Shelton Tricky: not ask for WACC
aakash1108 very tricky....i like it:

This portfolio has 3 components: 1.Stock 2.Money Market and 3.Bonds..

The question clearly asks for the contribution of the STOCKS to this portfolio
-
which is 0.575 X (-11) = -6.325

....isin't it a nice question. :)
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