A balanced portfolio invests in global equities and bonds. The following valuation data is provided:

holding	asset class	valuation as of end of month 1	valuation as of end of month 2
A	Equity	1000	1280
B	Equity	2000	1930
C	Bonds	1500	1520
D	Bonds	1800	1840
Cash	Cash	300	145

Note that the increase in valuation of A is due to 1) market performance and 2) a purchase with a transaction value of 200 already including transaction fees.

The cash balance at the end of month 2 is the result of the cash balance at the beginning of the month, a cash inflow of 50 (new subscriptions), a management fee of 5, the additional purchase of A (see above) and interest income.

Assume that all transactions occur at the end of the month, i.e., shortly before the end of month 2. The portfolio is benchmarked against a 30/70 (equity/bonds) benchmark with equities earning a return

of 50 bps and bonds a return of 1.6%.

a) Determine the total portfolio valuations at t=1 and t=2.

b) Show that the portfolio yields a performance of 1 %.

c) Determine the transaction value for the cash account how much is the interest income?.

d) For each holding A, B, C, D, and cash calculate return, weight, and contribution.

e) Show that performance contributions sum up to the portfolio performance of 1%.

f) Calculate the portfolio weights, returns, and contributions for the asset classes equity, bonds, and cash.

g) Calculate the benchmark return and the (arithmetic) outperformance.

h) Perform an attribution analysis based on Brinson/Fachler (add interaction to selection) showing attribution effects (allocation + selection) for the asset classes equity, bonds, and cash.

i) Comment your attiribution results.