Question

Calculate the contribution to total performance from currency, country, and stock selection for the manager in the example below. All exchange rates are expressed as units of foreign currency that can be purchased with 1 U.S. dollar. (Do not round intermediate calculations. Round your answers to 2 decimal places. Input all amounts as positive values.) points E1/E8 Return on Equity Index 15% 16 EAFE Weight 0.6 0.3 0.1 Europe Australasia Far East Manager's Weight 0.6 0.1 0.3 Manager's Return 12% 17 17 eBook 20 1.4 1.2 Print References Currency Selection Country Selection Stock Selection % Loss % Profit % Loss Profit/Loss relative to EAFE relative to EAFE relative to EAFE

Answer 1

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V161 R 159 160 for O P Q 1 CURRENCY SELECTION EAFE : EAFE WEIGHT X ( E1/EO-1) EAFE RETURN = 0.6 (1-1) + 0.3 (1.4-1) +0.1 (1.2-1) = MANAGER RETURN = MANAGER WEIGHT X (E1/EO-1) MANAGER RETURN = 0.6(1-1) + 0.1(1.4-1) + 0.3(1.2-1) = 161 14.00% 163 10.00% LOSS OF 4% (10%-14%) RELATIVE TO EAFE 168 169 2 COUNTRY SELECTION EAFE : EAFE WEIGHT X (RETURN ON EQUITY INDEX) EAFE RETURN = 0.6 (15%) +0.3 (16%) + 0.1 (20%) = MANAGER RETURN = MANAGER WEIGHT X (RETURN ON EQUITY INDEX) MANAGER RETURN = 0.6(15%) +0.1(16%) + 0.3(20%) = 15.8% 171 16.6% PROFIT OF 0.80% RELATIVE TO EAFE 3 STOCK SELECTION RETURN = MANAGER'S WEIGHT (MANAGER'S RETURN - RETURN ON EQUITY INDEX) RETURN = 0.6(12%-15%) + 0.1(17%-16%) + 0.3(17%-20%)= -2.60% 173 174 175 176 177 178 179 180 181 ANSWERS 182 LOSS OF 2.60% RELATIVE TO EAFE 183 184 CURRENCY SELECTION COUNTRY SELECTION STOCK SELECTION 4.00% LOSS 0.80% PROFIT 2.60% LOSS relative to EAFE relative to EAFE relative to EAFE 185 . .. NPV real clal merger country allocation amorti LOAN OPTIONS SPLIT VALUE OF SHARE HPR REAL RETURN EPS BEST PLAN CAC HIGH LOW Sheel1 Sheet2 )