In a Particular Year, Aggie Mutual Fund Earned a Return

In a particular year, Aggie Mutual Fund earned a return of 15% by making the following investments in the following asset classes: $\begin{array}{lcc} & \text { Weight } & \text { Return } \\\hline \text { Bonds } & 10 \% & 6 \% \\\text { Stocks } & 90 \%& 16 \%\\\hline\end{array}$ The return on a bogey portfolio was 10%, calculated as follows: $\begin{array}{lrrr}& \text { Weight } & \text { Return } \\\text { Bonds (Lehman Brothers Index) } & 50 \% & 5 \% \\\text { Stocks (S\&P } 500 \text { Index) } & 50 \% & 15 \% \\\hline\end{array}$ The total excess return on the Aggie managed portfolio was

A) 1%.
B) 3%.
C) 4%.
D) 5%.

Correct Answer:

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