2010 morning session question 8

why is the UK fixed income outside the tolerance band of +/- 10 % while the actual weight and target weight is 40% and 45% respectively?


OMG I just went back and looked. I think CFAI made an error. I am going to e-mail them tonight!

Unless this was sarcasm, no, afraid there is no error. CFAI is not wrong on this one. My suggestion is to look at V6 p. 92. The corridor is set as a percentage of the target allocation. So in this question the corridor is 10% of the target allocation. 10% of 40% = 4%. So the corridor is 40±4%. And 45% is outside of the corridor, so rebalancing is necessary. Must admit it is tricky though.

It was sarcasm. This is thread 20+ in the last 4 weeks about this. Using the search would have brought all of them up.