Answer:
(A). -1.4%
(B) -2.2%
(C). 0.8%
Explanation:
According to the scenario, computation of the given data are as follow:-
A). Primo Return= Primo Weight × Primo Return
Large Cap Primo Return = 0.6 × 17 ÷ 100 = 0.102
Mid Cap Primo Return=0.15 × 24 ÷ 100 = 0.036
Small Cap Primo Return=0.25 × 20÷100 = 0.05
Total Primo Return = 0.102 + 0.036 + 0.05
= .188 Or 18.8%
Benchmark Return = Benchmark Weight × Benchmark Return
Large Cap Benchmark Return=0.50 × 16÷100 = 0.08
Mid Cap Benchmark Return=0.40 × 26÷100 = 0.104
Small Cap Benchmark Return=0.10 × 18÷100 = 0.018
Total Benchmark Return = 0.08 + 0.104 + 0.018
= 0.202 Or 20.2%
Primo Under performed Benchmark = Primo Return - Benchmark Return
= 18.8% - 20.2%
= -1.4%
B). Pure Sector Allocation = ( Primo Weight - Benchmark Weight) × Benchmark Return
= (0.6 - 0.50) × 16% + (0.15 - 0.40) × 26% + (0.25-0.10) × 18%
= 0.10 × 0.16 - 25 × 0.26+.15 × 0.18
= 0.016 - 0.065 + 0.027
= -0.022 Or -2.2%
C). Security Selection Decisions = (Primo Return - Benchmark Return) × Primo Rate
= (.17 - .16) × .6 + (.24 - .26) × .15 + (.20.18) × .25
= 0.006 - 0.003 + 0.005
= 0.008 or 0.8%
