QUESTION 29

1. Arianna has invested her portfolio in the following manner: 30% AMZ large cap value fund, 20% AMZ mid cap growth fund, 10% AMZ small cap fund, and 40% AMZ investment grade bond fund. Most of the holdings in the mid cap fund have experienced substantial growth such that they are now more accurately characterized as large cap companies. Which of the following statements is true regarding Arianna's portfolio?

   		a. Arianna's portfolio has experienced optimization and she should make no adjustments.
   		b. Arianna's portfolio has experienced style drift and may need to be rebalanced.
   		c. Arianna's portfolio has experienced optimization and may need to be rebalanced.
   		d. Arianna's portfolio has experienced style drift and she should make no adjustments.

QUESTION 30

1. The investment policy statement for Abigail's portfolio identifies the following desired asset allocation ranges: large cap stocks 30% - 40%, mid cap stocks 10% - 20%, small cap stocks 5% - 15%, REITs 5% - 15%, bonds 25% - 35%. Due to market conditions in which bond prices have risen and stock prices have fallen, the current portfolio allocation is as follows: large cap stocks 25%, mid cap stocks 10%, small cap stocks 2%, REITs 8%, bonds 55%. Which of the following rebalancing actions should the portfolio manager take?

   		a. Sell bonds, buy large and small cap stocks.
   		b. Sell bonds, buy large, mid, and small cap stocks and REITs.
   		c. Sell large cap stocks, buy bonds.
   		d. Sell large cap stocks and REITs, buy bonds and mid cap stocks.