A-1. What was the manager’s return in the month? (Do not round intermediate calculations. Input all...

a-1) Manager's return = Equity Return*Equity Weight + Bond Return*Bond Weight + Cash Return*Cash Weight

= 2.4%*0.6+1.4%*0.3+0.5%*0.1 = 1.91%

a-2)

Benchmark's Return = Equity Return*Equity Weight + Bond Return*Bond Weight + Cash Return*Cash Weight

= 2.9%*0.7+1.6%*0.2+0.5%*0.1 = 2.4%

Manager's Performance = Manager's return - Benchmark's Return = 1.91%-2.4% = - 0.49% (under performance)

b)

Differential Returns: Manager's return in equity - Benchmark Return in Equity = 2.4%-2.9% = - 0..5%

Manager's return in Bonds - Benchmark Return in Bond = 1.4%-1.6% = - 0.2%

Manager's return in cash - Benchmark Return in cash = 0.5%-0.5% =0%

Contribution to performance to security Selection= Differential returns*weight in manager portfolio = -0.5%*0.6 - 0.2%*0.3 + 0%*0.1 = - 0.36%

c)

Differential Returns: Manager's Weight in equity - Benchmark Weight in Equity = 0.6-0.7= - 0.1

Manager's Weight in Bonds - Benchmark Weight in Bond = 0.3-0.2 = 0.1

Manager's Weight in cash - Benchmark Weight in cash = 0.1-0.1 =0

Contribution to performance to security Selection= Differential weights*Benchmark's return = -0.1*2.9% - 0.1*1.6% + 0*0.5% = - 0.13%

Excess Performance = -0.36%-0.13% = -0.49%