Explanation:
| Expected treasury yield | 7.50% |
|---|---|
| +Unexpected treasury yield | 0.50% |
| +Return from sector allocation | 0.50% |
| +Return from allocation selection interaction | 0.25% |
| +Return attributable to within-sector selection | 1.25% (can be backed out given the other inform) |
| Total return | = 10.0% |
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Q.3187 Lilly Johana is a bond portfolio manager at Jackson Investment. She is in the process of decomposing the various sources of return to her bond portfolio that yielded a return of 10%. The actual treasury yield was 8%, which is 0.5% better than the expected yield of 7.5%. In addition, Lilly has ascertained that her portfolio benefited 0.50% due to sector allocation and 0.25% from allocation/selection interaction. Based on this information, how much of the portfolio's overall return is attributable to within-sector selection?
A
1.25%
B
1.00%
C
1.75%
D
2.50%