CFAI 2010 AM Exam Question 8 Part A

CFA Level III
#1

With a corridor widths set at +/- 10% of the target allocation. All assets classes including the UK Fixed Income are within the tolerance band, why in the guideline answer its mentioned that all asset classes need to be rebalanced as the UK Fixed Income is outside the tolerance band.

For the UK Fixed Income:

Target Weight : 40%; 31 March Allocation: 45%, which means within the tolerance band of 30% - 50%, so WHY in the guideline answer its mentioned that it OUTSIDE the tolerance band?

Am I missing something here?

Thanks.

#2

it is not +/- 10% directly.

it is +/-10% of 40% - so actual band is 36-44 and 45 is outside that band

you assumed absolute 10% - while the question is taking a relative 10%

#3

Got it now.

Thanks cpk!

#4

nice trick

#5

key statement was “with tolerance bands or corridor widths set at ± 10% of the target allocation.”