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Explanation:
Return = 7% = ($107,000 − $100,000)/$100,000.
The Asset Category investment strategy assumes that the fund's beginning value and external cash flows are invested passively in a combination of the designated asset category benchmarks, with the specific allocation to each benchmark based on the fund sponsor's policy allocation to those asset categories. In essence, the asset category corresponds to a pure index approach. The dollar return would have been $7,000 or 7% on the initial $100,000.
Q.3186 Dale Charles is an equity fund analyst at Songyang Investments, a large mutual fund in South Korea. To thoroughly evaluate the results of a macro performance attribution analysis of a fund, Dale has gathered the following data on the fund:
| Beginning value | $100,000 |
|---|---|
| Net contributions | $100,000 |
| Risk-free asset | $103,000 |
| Asset category | $107,000 |
| Benchmarks | $104,000 |
| Investment strategies | $113,000 |
| Allocation effects | $116,000 |
Had the manager only engaged in a pure index approach, then instead of having a fund return of 16%, the return of the fund would have been closest to:
A
16%
B
7%
C
10%
D
13%
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