What is the contribution of security selection

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Reference no: EM132064023

You are a Swedish investor owning a portfolio of Swedish and American stocks. Their respective benchmarks are the OMX index and the S&P index. There have been no movements during the year (cash flows, sales, or purchase). Dividends of SKr 20,000 have been paid on Swedish stocks. Valuation and performance analysis is done in Swedish krona (SKr). Here are the valuations at the start and the end of the year:

January 1 December 31

Swedish Stocks SKr 600,000 SKr 660,000

U.S. Stocks $100,000 $140,000

Cash 0 SKr 20,000

Exchange Rate 6 SKr/$ 5.5 SKr/$

OMX Index 100 120

S&P Index 100 125

a. What is the total value of the portfolio in SKr on January 1 and on December 31?

b. What is the total return on the portfolio?

c. Decompose this return into capital gain, yield, and currency contribution.

d. What is the contribution of security selection?

Reference no: EM132064023

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