Under the Performance Presentation Standards, asset-weighting of portfolio returns within a composite is required. The ________ of period weightings must be used.
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A. B. C. D.A
Composites must be asset weighted using beginning-of-period weightings.
Under the Performance Presentation Standards, asset-weighting of portfolio returns within a composite is required. This means that when calculating the composite return, the returns of individual assets within the portfolio need to be weighted based on their relative sizes or weights in the portfolio.
The question asks about the specific period weightings that must be used when asset-weighting the portfolio returns within a composite. The available options are:
A. Beginning B. End C. None of these answers D. Midpoint
To determine the correct answer, let's consider the implications of each option:
A. Beginning: If the beginning period weightings were used, it would mean that the returns of individual assets would be weighted based on their relative sizes at the beginning of the period. However, this would not accurately reflect any changes in the portfolio composition during the period.
B. End: If the end period weightings were used, it would mean that the returns of individual assets would be weighted based on their relative sizes at the end of the period. This approach would not consider any changes in the portfolio composition that might have occurred during the period.
C. None of these answers: This option suggests that none of the given choices are correct. However, since the question states that asset-weighting is required, it means that there must be a specific method for calculating the weightings.
D. Midpoint: The midpoint option implies that the returns of individual assets should be weighted based on their relative sizes or weights at the midpoint of the period. This approach would account for any changes in the portfolio composition that might have occurred during the period and provide a more accurate representation of the overall portfolio performance.
Based on the above analysis, the most appropriate answer to the question is D. Midpoint, as it aligns with the requirement of asset-weighting portfolio returns within a composite while considering any changes in the portfolio composition during the period.