Rebalancing Allowable Range +/- 10% discrepancy

In the 2010 L3 Exam in Question 8, a +/- 10% corridor width (see below) is applied proportionally on all asset classes, e.g. +/- 10% x Asset class of e.g. 40% = 36% to 44%.

_“Malik suggests that Brown consider percentage-of-portfolio rebalancing with daily monitoring and rebalancing to target weights. He offers to demonstrate how the two approaches would differ after rebalancing on 1 April, given the allocations shown in Exhibit 1, with tolerance bands or corridor widths set at ± 10% of the target allocation _.”

HOWEVER, in the asset allocation book, page 281 example 22, the author is applying the 10% in absolute terms, e.g. 45% +/- 10% = 35% to 55%.

Appreciative of your help!

It can be used both ways. It will be explained which way it is used if it comes up on the test. At least all the mocks I have seen they explicitly state how it is calculated.