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<html xmlns:v="urn:schemas-microsoft-com:vml" xmlns:o="urn:schemas-microsoft-com:office:office" xmlns:w="urn:schemas-microsoft-com:office:word" xmlns:m="http://schemas.microsoft.com/office/2004/12/omml" xmlns="http://www.w3.org/TR/REC-html40"> <head> <meta http-equiv=Content-Type content="text/html; charset=unicode"> <meta name=ProgId content=Word.Document> <meta name=Generator content="Microsoft Word 15"> <meta name=Originator content="Microsoft Word 15"> <link rel=File-List href="reading_assignment_core_1_files/filelist.xml"> <link rel=Edit-Time-Data href="reading_assignment_core_1_files/editdata.mso">  <title>Graded Project: Securities and Investments</title>  <link rel=themeData href="reading_assignment_core_1_files/themedata.thmx"> <link rel=colorSchemeMapping href="reading_assignment_core_1_files/colorschememapping.xml">  <link rel=Stylesheet type="text/css" media=all href="../../pagestyles.css"> <style>  </style>  <meta charset=utf-8> <script type="text/javascript" async src="https://cdnjs.cloudflare.com/ajax/libs/mathjax/2.7.5/MathJax.js?config=TeX-MML-AM_CHTML"> </script>  </head> <body lang=EN-US style='tab-interval:.5in;word-wrap:break-word'> <div class=WordSection1> <h1>Graded Project: Securities and Investments<o:p></o:p></h1> Your project must be submitted as a Word document (.docx, .doc)*. Your project will be individually graded by your instructor and therefore will take up to a few weeks to grade.<o:p></o:p> Be sure that each of your files contains the following information:<o:p></o:p> <ul type=disc> <li class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt:auto; mso-list:l3 level1 lfo1;tab-stops:list .5in'>Your name<o:p></o:p></li> <li class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt:auto; mso-list:l3 level1 lfo1;tab-stops:list .5in'>Your student ID numb<o:p></o:p></li> <li class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt:auto; mso-list:l3 level1 lfo1;tab-stops:list .5in'>The exam number<o:p></o:p></li> <li class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt:auto; mso-list:l3 level1 lfo1;tab-stops:list .5in'>Your email address<o:p></o:p></li> </ul> Be sure to keep a backup copy of any files you submit to the school!<o:p></o:p> <div class=MsoNormal align=center style='text-align:center'> <hr size=2 width="100%" align=center> </div> <h1>Part 1: Sector Performance<o:p></o:p></h1> Investment managers strive to outperform both the sector they focus on and broad market indexes such as the S&P 500. The performance of a portfolio is determined by both the weightings given to different types of investments as well as the actual performance of these investments. In addition, the level of risk an investor is willing to take on will impact the design of a portfolio.<o:p></o:p> To answer the questions in Part 1, you’ll use the information provided about the portfolio in the table below. The portfolio is broken out by sectors and shows the investor’s portfolio’s weighting and performance and the S&P 500’s weighting and performance in each sector. The final column shows the individual investments’ overall contributions to the portfolio. Note that an investment can underperform the S&P and still have a positive contribution to the portfolio based on the difference in weighting.<o:p></o:p> <table class=MsoNormalTable border=1 cellspacing=0 cellpadding=0 style='mso-cellspacing:0in;mso-yfti-tbllook:1184;mso-padding-alt:0in 0in 0in 0in'> <tr style='mso-yfti-irow:0;mso-yfti-firstrow:yes'> <td colspan=8 style='padding:0in 0in 0in 0in'> Portfolio Information<o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:1'> <td style='padding:0in 0in 0in 0in'> Sector<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> (1) Portfolio Weighting<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> (2) S&P Weighting<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> (3) Differen-ces in Weighting<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> (4) Portfolio Return<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> (5) S&P Return<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> (6) Sector Over-or Under- Performance<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> (7) = (3) x (6) Sector Allocation Contributions<o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:2'> <td style='padding:0in 0in 0in 0in'> Telecom- munications Services<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 3.10%<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 5.90%<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> a. ?<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 2.50%<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 3.10%<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> k. ?<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> u. ?<o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:3'> <td style='padding:0in 0in 0in 0in'> Utilities<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 7.50%<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 3.80%<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> b. ?<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 3.10%<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 1.90%<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> l. ?<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> v. ?<o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:4'> <td style='padding:0in 0in 0in 0in'> Information Technology<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 14.30%<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 17.90%<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> c. ?<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 4.90%<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 3.20%<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> m. ?<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> w. ?<o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:5'> <td style='padding:0in 0in 0in 0in'> Materials<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 6.30%<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 3.70%<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> d. ?<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 4.80%<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 5.10%<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> n. ?<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> x. ?<o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:6'> <td style='padding:0in 0in 0in 0in'> Financials<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 13.40%<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 17.10%<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> e. ?<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 6.20%<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 4.80%<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> o. ?<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> y. ?<o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:7'> <td style='padding:0in 0in 0in 0in'> Consumer Discretionary<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 12.70%<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 13.50%<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> f. ?<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 2.10%<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 4.00%<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> p. ?<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> z. ?<o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:8'> <td style='padding:0in 0in 0in 0in'> Industrials<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 14.10%<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 11.90%<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> g. ?<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 4.90%<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 3.10%<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> q. ?<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> aa. ?<o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:9'> <td style='padding:0in 0in 0in 0in'> Energy<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 8.40%<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 8.00%<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> h. ?<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 3.70%<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 8.60%<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> r. ?<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> bb. ?<o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:10'> <td style='padding:0in 0in 0in 0in'> Healthcare<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 15.30%<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 11.70%<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> i. ?<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 9.80%<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 5.70%<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> s. ?<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> cc. ?<o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:11;mso-yfti-lastrow:yes'> <td style='padding:0in 0in 0in 0in'> Consumer Staples<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 4.90%<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 6.50%<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> j. ?<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 1.50%<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 13.20%<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> t. ?<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> dd. ?<o:p></o:p> </td> </tr> </table> <ol start=1 type=1> <li class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt:auto; mso-list:l1 level1 lfo2;tab-stops:list .5in'>Fill in the missing values in the table above for a quarterly comparison of sectors with the S&P 500 Index. Remember when performing calculations that the numbers shown are percentage values. Record your answers as percentage values to two decimal places. <o:p></o:p></li> </ol> <table class=MsoNormalTable border=0 cellspacing=4 cellpadding=0 style='mso-cellspacing:1.5pt;margin-left:.5in;mso-yfti-tbllook:1184'> <tr style='mso-yfti-irow:0;mso-yfti-firstrow:yes'> <td style='padding:.75pt .75pt .75pt .75pt'> a. _______<o:p></o:p> </td> <td style='padding:.75pt .75pt .75pt .75pt'> k. _______<o:p></o:p> </td> <td style='padding:.75pt .75pt .75pt .75pt'> u. _______<o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:1'> <td style='padding:.75pt .75pt .75pt .75pt'> b. _______<o:p></o:p> </td> <td style='padding:.75pt .75pt .75pt .75pt'> l. _______<o:p></o:p> </td> <td style='padding:.75pt .75pt .75pt .75pt'> v. _______<o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:2'> <td style='padding:.75pt .75pt .75pt .75pt'> c. _______<o:p></o:p> </td> <td style='padding:.75pt .75pt .75pt .75pt'> m. _______<o:p></o:p> </td> <td style='padding:.75pt .75pt .75pt .75pt'> w. _______<o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:3'> <td style='padding:.75pt .75pt .75pt .75pt'> d. _______<o:p></o:p> </td> <td style='padding:.75pt .75pt .75pt .75pt'> n. _______<o:p></o:p> </td> <td style='padding:.75pt .75pt .75pt .75pt'> x. _______<o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:4'> <td style='padding:.75pt .75pt .75pt .75pt'> e. _______<o:p></o:p> </td> <td style='padding:.75pt .75pt .75pt .75pt'> o. _______<o:p></o:p> </td> <td style='padding:.75pt .75pt .75pt .75pt'> y. _______<o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:5'> <td style='padding:.75pt .75pt .75pt .75pt'> f. _______<o:p></o:p> </td> <td style='padding:.75pt .75pt .75pt .75pt'> p. _______<o:p></o:p> </td> <td style='padding:.75pt .75pt .75pt .75pt'> z. _______<o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:6'> <td style='padding:.75pt .75pt .75pt .75pt'> g. _______<o:p></o:p> </td> <td style='padding:.75pt .75pt .75pt .75pt'> q. _______<o:p></o:p> </td> <td style='padding:.75pt .75pt .75pt .75pt'> aa. _______<o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:7'> <td style='padding:.75pt .75pt .75pt .75pt'> h. _______<o:p></o:p> </td> <td style='padding:.75pt .75pt .75pt .75pt'> r. _______<o:p></o:p> </td> <td style='padding:.75pt .75pt .75pt .75pt'> bb. _______<o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:8'> <td style='padding:.75pt .75pt .75pt .75pt'> i. _______<o:p></o:p> </td> <td style='padding:.75pt .75pt .75pt .75pt'> s. _______<o:p></o:p> </td> <td style='padding:.75pt .75pt .75pt .75pt'> cc. _______<o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:9;mso-yfti-lastrow:yes'> <td style='padding:.75pt .75pt .75pt .75pt'> j. _______<o:p></o:p> </td> <td style='padding:.75pt .75pt .75pt .75pt'> t. _______<o:p></o:p> </td> <td style='padding:.75pt .75pt .75pt .75pt'> dd. _______<o:p></o:p> </td> </tr> </table> <ol start=2 type=1> <li class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt:auto; mso-list:l1 level1 lfo2;tab-stops:list .5in'>Did the performance turned in by the investment manager underperform or outperform the S&P 500? By how much? Show your work.<o:p></o:p></li> <li class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt:auto; mso-list:l1 level1 lfo2;tab-stops:list .5in'>Which sector turned in the greatest positive contribution to the portfolio’s performance? Explain why this investment made the greatest positive contribution based on the differences in weighting and the sector over- or under- performance.<o:p></o:p></li> <li class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt:auto; mso-list:l1 level1 lfo2;tab-stops:list .5in'>Which sector made the greatest negative contribution to the portfolio’s performance? Explain why this investment made the greatest negative contribution based on the differences in weighting and the sector over- or under- performance.<o:p></o:p></li> </ol> <h1>Part 2: Portfolio Analysis<o:p></o:p></h1> Use the three portfolios shown below to answer questions 5–8 in Part 2.<o:p></o:p> <table class=MsoNormalTable border=1 cellspacing=0 cellpadding=0 style='mso-cellspacing:0in;mso-yfti-tbllook:1184;mso-padding-alt:0in 0in 0in 0in'> <tr style='mso-yfti-irow:0;mso-yfti-firstrow:yes'> <td colspan=4 style='padding:0in 0in 0in 0in'> Portfolio 1<o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:1'> <td style='padding:0in 0in 0in 0in'> Security<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> Amount Invested<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> Expected Return<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> Beta<o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:2'> <td style='padding:0in 0in 0in 0in'> Security A<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'>  $   4,000<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'>  9%<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'>   .80<o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:3'> <td style='padding:0in 0in 0in 0in'> Security B<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'>  $   5,000<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 12%<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 1.15<o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:4'> <td style='padding:0in 0in 0in 0in'> Security C<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'>  $ 12,000<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 14%<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'>   .95<o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:5;mso-yfti-lastrow:yes'> <td style='padding:0in 0in 0in 0in'> Security D<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'>   $   8,000<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 15%<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 1.23<o:p></o:p> </td> </tr> </table> <o:p> </o:p> <table class=MsoNormalTable border=1 cellspacing=0 cellpadding=0 style='mso-cellspacing:0in;mso-yfti-tbllook:1184;mso-padding-alt:0in 0in 0in 0in'> <tr style='mso-yfti-irow:0;mso-yfti-firstrow:yes'> <td colspan=4 style='padding:0in 0in 0in 0in'> Portfolio 2<o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:1'> <td style='padding:0in 0in 0in 0in'> Security<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> Amount Invested<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> Expected Return<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> Beta<o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:2'> <td style='padding:0in 0in 0in 0in'> Security A<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'>  $   3,000<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 16%<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 1.22<o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:3'> <td style='padding:0in 0in 0in 0in'> Security B<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> $ 11,000<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 13%<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 1.54<o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:4'> <td style='padding:0in 0in 0in 0in'> Security C<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> $   9,000<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'>   8%<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'>    .87<o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:5;mso-yfti-lastrow:yes'> <td style='padding:0in 0in 0in 0in'> Security D<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> $   6,000<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 11%<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'>    .81<o:p></o:p> </td> </tr> </table> <o:p> </o:p> <table class=MsoNormalTable border=1 cellspacing=0 cellpadding=0 style='mso-cellspacing:0in;mso-yfti-tbllook:1184;mso-padding-alt:0in 0in 0in 0in'> <tr style='mso-yfti-irow:0;mso-yfti-firstrow:yes'> <td colspan=4 style='padding:0in 0in 0in 0in'> Portfolio 3<o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:1'> <td style='padding:0in 0in 0in 0in'> Security<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> Amount Invested<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> Expected Return<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> Beta<o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:2'> <td style='padding:0in 0in 0in 0in'> Security A<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> $15,000<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 10%<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 1.72<o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:3'> <td style='padding:0in 0in 0in 0in'> Security B<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> $12,000<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'>   9%<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'>    .81<o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:4'> <td style='padding:0in 0in 0in 0in'> Security C<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> $ 3,000<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 12%<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'>    .72<o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:5;mso-yfti-lastrow:yes'> <td style='padding:0in 0in 0in 0in'> Security D<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> $ 2,000<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 15%<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 1.54<o:p></o:p> </td> </tr> </table> <ol start=5 type=1> <li class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt:auto; mso-list:l2 level1 lfo3;tab-stops:list .5in'>Based on beta, which portfolio has the highest level of systematic risk? Show your work.<o:p></o:p></li> <li class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt:auto; mso-list:l2 level1 lfo3;tab-stops:list .5in'>If the risk-free rate is 5.5 percent, which of these portfolios has the highest reward-to-risk ratio? Show your work.<o:p></o:p></li> <li class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt:auto; mso-list:l2 level1 lfo3;tab-stops:list .5in'>Suppose that the risk-free rate is 5.5 percent, the return over three years for each portfolio matches its expected return, and the portfolios have 3-year annual return standard deviations as follows: <o:p></o:p></li> </ol> <table class=MsoNormalTable border=0 cellspacing=4 cellpadding=0 width=200 style='width:150.0pt;mso-cellspacing:1.5pt;margin-left:.5in;mso-yfti-tbllook: 1184'> <tr style='mso-yfti-irow:0;mso-yfti-firstrow:yes'> <td style='padding:.75pt .75pt .75pt .75pt'> Portfolio 1<o:p></o:p> </td> <td style='padding:.75pt .75pt .75pt .75pt'> 22%<o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:1'> <td style='padding:.75pt .75pt .75pt .75pt'> Portfolio 2<o:p></o:p> </td> <td style='padding:.75pt .75pt .75pt .75pt'> 26%<o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:2;mso-yfti-lastrow:yes'> <td style='padding:.75pt .75pt .75pt .75pt'> Portfolio 3<o:p></o:p> </td> <td style='padding:.75pt .75pt .75pt .75pt'> 18%<o:p></o:p> </td> </tr> </table> <ol start=8 type=1> <li class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt:auto; mso-list:l2 level1 lfo3;tab-stops:list .5in'>If you were restricted to selecting one of the three portfolios to invest all your money in, which should you choose based on that portfolio having the best ratio of excess return per unit of total risk as measured by its Sharpe ratio?<o:p></o:p></li> <li class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt:auto; mso-list:l2 level1 lfo3;tab-stops:list .5in'>Suppose that the actual returns for Portfolios 1, 2, and 3 were as follows: <o:p></o:p></li> </ol> <table class=MsoNormalTable border=0 cellspacing=4 cellpadding=0 width=200 style='width:150.0pt;mso-cellspacing:1.5pt;margin-left:.5in;mso-yfti-tbllook: 1184'> <tr style='mso-yfti-irow:0;mso-yfti-firstrow:yes'> <td style='padding:.75pt .75pt .75pt .75pt'> Portfolio 1<o:p></o:p> </td> <td style='padding:.75pt .75pt .75pt .75pt'> 11.3<o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:1'> <td style='padding:.75pt .75pt .75pt .75pt'> Portfolio 2<o:p></o:p> </td> <td style='padding:.75pt .75pt .75pt .75pt'> 12.5<o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:2;mso-yfti-lastrow:yes'> <td style='padding:.75pt .75pt .75pt .75pt'> Portfolio 3<o:p></o:p> </td> <td style='padding:.75pt .75pt .75pt .75pt'>   9.4<o:p></o:p> </td> </tr> </table> <ol start=10 type=1> <li class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt:auto; mso-list:l2 level1 lfo3;tab-stops:list .5in'>Also, assume that the risk-free rate was 5.5 percent and the average return on the market portfolio was 8 percent. <o:p></o:p></li> <ol start=1 type=a> <li class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt: auto;mso-list:l2 level2 lfo3;tab-stops:list 1.0in'>Which of the three portfolios has the highest Jensen’s alpha? Show your work.<o:p></o:p></li> <li class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt: auto;mso-list:l2 level2 lfo3;tab-stops:list 1.0in'>Which has the highest Treynor ratio? Show your work.<o:p></o:p></li> </ol> </ol> <h1 style='margin-left:.5in'>Part 3: Selecting a Portfolio<o:p></o:p></h1> Use the two portfolios shown in the tables below to answer the questions in Part 3.<o:p></o:p> <table class=MsoNormalTable border=1 cellspacing=0 cellpadding=0 style='mso-cellspacing:0in;margin-left:.5in;mso-yfti-tbllook:1184;mso-padding-alt: 0in 0in 0in 0in'> <tr style='mso-yfti-irow:0;mso-yfti-firstrow:yes'> <td colspan=2 style='padding:0in 0in 0in 0in'> Portfolio 1<o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:1'> <td style='padding:0in 0in 0in 0in'> Asset Category<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> Percentage of Portfolio<o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:2'> <td style='padding:0in 0in 0in 0in'> U.S. small-company stocks<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 5<o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:3'> <td style='padding:0in 0in 0in 0in'> U.S. large-company stocks<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 10<o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:4'> <td style='padding:0in 0in 0in 0in'> International stocks<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 5<o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:5'> <td style='padding:0in 0in 0in 0in'> U.S. government bonds<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 50<o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:6;mso-yfti-lastrow:yes'> <td style='padding:0in 0in 0in 0in'> U.S. corporate bonds<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 30<o:p></o:p> </td> </tr> </table> <o:p> </o:p> <table class=MsoNormalTable border=1 cellspacing=0 cellpadding=0 style='mso-cellspacing:0in;margin-left:.5in;mso-yfti-tbllook:1184;mso-padding-alt: 0in 0in 0in 0in'> <tr style='mso-yfti-irow:0;mso-yfti-firstrow:yes'> <td colspan=2 style='padding:0in 0in 0in 0in'> Portfolio 2<o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:1'> <td style='padding:0in 0in 0in 0in'> Asset Category<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> Percentage of Portfolio<o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:2'> <td style='padding:0in 0in 0in 0in'> U.S. small-company stocks<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 20<o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:3'> <td style='padding:0in 0in 0in 0in'> U.S. large-company stocks<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 30<o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:4'> <td style='padding:0in 0in 0in 0in'> International stocks<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 25<o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:5'> <td style='padding:0in 0in 0in 0in'> U.S. government bonds<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 15<o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:6;mso-yfti-lastrow:yes'> <td style='padding:0in 0in 0in 0in'> U.S. corporate bonds<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> 10<o:p></o:p> </td> </tr> </table> <ol start=5 type=1> <ol start=9 type=1> <li class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt: auto;mso-list:l0 level2 lfo4;tab-stops:list 1.0in'>In your role as a financial advisor, you’re advising a client, Sally, a 30-year old computer programmer who makes an above-average salary. She’s investing money in her 401(k) that she doesn’t plan to use until retirement. In your opinion, which of the two portfolios above would be most appropriate for these funds? In your answer, explain why you believe the portfolio you’ve chosen is appropriate and explain why the portfolio you didn’t choose is not appropriate.<o:p></o:p></li> <li class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt: auto;mso-list:l0 level2 lfo4;tab-stops:list 1.0in'>In your role as a financial advisor, you’re advising a client, Bob, who has just retired and rolled over his 401(k) into a self-directed IRA account. Bob intends to use these funds to provide income to live on in his retirement. In your opinion, which of the two portfolios above would be most appropriate for these funds? In your answer, explain why you believe the portfolio you’ve chosen is appropriate and explain why the portfolio you didn’t choose is not appropriate.<o:p></o:p></li> </ol> </ol> <h1 style='margin-left:.5in'>Scoring Guidelines<o:p></o:p></h1> Your project will be graded according to the criteria found in the rubric below.<o:p></o:p> <h1 style='margin-left:.5in'>Rubric<o:p></o:p></h1> <table class=MsoNormalTable border=1 cellspacing=0 cellpadding=0 width=650 style='width:487.5pt;mso-cellspacing:0in;margin-left:.5in;border:solid windowtext 1.0pt; mso-border-alt:solid windowtext .75pt;mso-yfti-tbllook:1184;mso-padding-alt: 0in 0in 0in 0in'> <tr style='mso-yfti-irow:0;mso-yfti-firstrow:yes'> <td colspan=6 style='padding:0in 0in 0in 0in'> Securities and Investments Graded Project<o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:1'> <td style='padding:0in 0in 0in 0in'> Skill/ Grading Criteria<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> Excellent<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> Good<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> Satisfactory<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> Poor<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> Grader Comments<o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:2'> <td style='padding:0in 0in 0in 0in'> Part 1<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'>  <o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'>  <o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'>  <o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'>  <o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'>  <o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:3'> <td style='padding:0in 0in 0in 0in'> Question 1<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> All answers are correct. 30<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> Many of the answers are correct. 29<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> Some of the answers are correct. 28–26<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> Few or none of the answers are correct. 25–0<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'>  <o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:4'> <td style='padding:0in 0in 0in 0in'> Question 2<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> The answer and explanation are correct, and calculations are shown. 5<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> The answer is correct, but the explanation or calculations are incorrect. 4<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> The answer is correct, but the calculations or explanation is not shown. 3<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> The answer is incorrect, and the explanation and calculations are not shown. 2–0<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'>  <o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:5'> <td style='padding:0in 0in 0in 0in'> Question 3<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> The answer and explanation are correct. 5<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> The answer is correct, but the explanation is incorrect. 4<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> The answer is correct, but the explanation is not shown. 3<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> The answer is incorrect and/or the explanation is not shown. 2–0<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'>  <o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:6'> <td style='padding:0in 0in 0in 0in'> Question 4<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> The answer and explanation are correct. 5<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> The answer is correct, but the explanation is incorrect. 4<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> The answer is correct, but the explanation is not shown. 3<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> The answer is incorrect and/or the explanation is not shown. 2–0<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'>  <o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:7'> <td style='padding:0in 0in 0in 0in'> Part 2<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'>  <o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'>  <o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'>  <o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'>  <o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'>  <o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:8'> <td style='padding:0in 0in 0in 0in'> Question 5<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> The answer is correct and the correct calculations are shown. 10<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> The answer is correct and the cal- culations are incorrect, or the answer is incorrect but the calculations are correct. 9<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> The answer is correct, but the calculations are not shown. 8–7<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> The answer is incorrect and/or the calculations are not shown. 6–0<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'>  <o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:9'> <td style='padding:0in 0in 0in 0in'> Question 6<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> The answer is correct, and the correct calculations are shown. 10<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> The answer is correct, and the cal- culations are incorrect, or the answer is incorrect, but the calculations are correct. 9<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> The answer is correct, but the calculations are not shown. 8–7<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> The answer is incorrect and/, or the calculations are not shown. 6–0<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'>  <o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:10'> <td style='padding:0in 0in 0in 0in'> Question 7<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> The answer is correct, and the correct calculations are shown. 5<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> The answer is correct, and the calculations are incorrect, or the answer is incorrect, but the calculations are correct. 4<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> The answer is correct, but the calculations are not shown. 3<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> The answer is incorrect and/, or the calculations are not shown. 2–0<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'>  <o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:11'> <td style='padding:0in 0in 0in 0in'> Question 8<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> The answer is correct and the correct calculations are shown. 10<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> The answer is correct, and the calculations are incorrect, or the answer is incorrect, but the cal- culations are correct. 9<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> The answer is correct, but the calculations are notshown. 8–7<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> The answer is incorrect and/, or the calculations are not shown. 6–0<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'>  <o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:12'> <td style='padding:0in 0in 0in 0in'> Part 3<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'>  <o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'>  <o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'>  <o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'>  <o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'>  <o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:13;height:99.0pt'> <td style='padding:0in 0in 0in 0in;height:99.0pt'> Question 9<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in;height:99.0pt'> The answer and explanation are both correct 10<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in;height:99.0pt'> The answer is correct, but the explanation is incorrect. 9<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in;height:99.0pt'> The answer is correct, but the explanation is incomplete or not shown. 8–7<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in;height:99.0pt'> The answer is incorrect and/, or the explanation is not shown 6–0<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in;height:99.0pt'>  <o:p></o:p> </td> </tr> <tr style='mso-yfti-irow:14;mso-yfti-lastrow:yes'> <td style='padding:0in 0in 0in 0in'> Question 10<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> The answer and explanation are both correct 10<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> The answer is correct but the explanation is incorrect. 9<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> The answer is correct, but the explanation is incomplete or not shown. 8–7<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'> The answer is incorrect and/, or the explanation is not shown 6–0<o:p></o:p> </td> <td style='padding:0in 0in 0in 0in'>  <o:p></o:p> </td> </tr> </table> <o:p> </o:p> </div> </body> </html>