Question 6 Portfolio Performance Evaluation (6 marks) The table below shows that actual return of each sector of a money managers portfolio in column (1), the fraction of the portfolio allocated to each sector in column (2), the returns of sector indexes in column (3), and the benchmark sector allocations in column (4).

(1) Actual Return (2) Actual Weight (3) Index Return (4) Benchmark Weight Equity 10.0% 0.50 12.0% 0.50 Bonds 5.0% 0.30 2.0% 0.40 Cash 1.0% 0.20 1.0% 0.10

(a) What was the total actual return on managers portfolio? Whether the manager's over-performance was relative to the benchmark or underperformance relative to the benchmark? (2 marks)

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