CFA Practice Question

There are 294 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 the 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 wi * Xi, where wi is the percentage weight in the portfolio of the ith asset and Xi is the investment return of the ith asset. The contribution of any asset will equal its weight in the portfolio times 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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