Part 1: Sector Performance
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.
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.
Portfolio Information  
Sector  (1) Portfolio Weighting  (2) S&P Weighting  (3) Differences in Weighting  (4) Portfolio Return  (5) S&P Return  (6) Sector Overor Under Perform ance 
(7) = (3) x (6) Sector Allocation Contributions 
Telecom munications Services  3.10%  5.90%  a. ?  2.50%  3.10%  k. ?  u. ? 
Utilities  7.50%  3.80%  b. ?  3.10%  1.90%  l. ?  v. ? 
Information Technology  14.30%  17.90%  c. ?  4.90%  3.20%  m. ?  w. ? 
Materials  6.30%  3.70%  d. ?  4.80%  5.10%  n. ?  x. ? 
Financials  13.40%  17.10%  e. ?  6.20%  4.80%  o. ?  y. ? 
Consumer Discretionary  12.70%  13.50%  f. ?  2.10%  4.00%  p. ?  z. ? 
Industrials  14.10%  11.90%  g. ?  4.90%  3.10%  q. ?  aa. ? 
Energy  8.40%  8.00%  h. ?  3.70%  8.60%  r. ?  bb. ? 
Healthcare  15.30%  11.70%  i. ?  9.80%  5.70%  s. ?  cc. ? 
Consumer Staples  4.90%  6.50%  j. ?  1.50%  13.20%  t. ?  dd. ? 
 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.
a. _______  k. _______  u. _______ 
b. _______  l. _______  v. _______ 
c. _______  m. _______  w. _______ 
d. _______  n. _______  x. _______ 
e. _______  o. _______  y. _______ 
f. _______  p. _______  z. _______ 
g. _______  q. _______  aa. _______ 
h. _______  r. _______  bb. _______ 
i. _______  s. _______  cc. _______ 
j. _______  t. _______  dd. _______ 
 Did the performance turned in by the investment manager underperform or outperform the S&P 500? By how much? Show your work.
 Which sector turned in the greatest positivecontribution 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.
 Which sector made the greatest negativecontribution 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.
Part 2: Portfolio Analysis
Use the three portfolios shown below to answer questions 5–8 in Part 2.
Portfolio 1  
Security  Amount Invested  Expected Return  Beta 
Security A  $ 4,000  9%  .80 
Security B  $ 5,000  12%  1.15 
Security C  $ 12,000  14%  .95 
Security D  $ 8,000  15%  1.23 
Portfolio 2  
Security  Amount Invested  Expected Return  Beta 
Security A  $ 3,000  16%  1.22 
Security B  $ 11,000  13%  1.54 
Security C  $ 9,000  8%  .87 
Security D  $ 6,000  11%  .81 
Portfolio 3  
Security  Amount Invested  Expected Return  Beta 
Security A  $15,000  10%  1.72 
Security B  $12,000  9%  .81 
Security C  $ 3,000  12%  .72 
Security D  $ 2,000  15%  1.54 
 Based on beta, which portfolio has the highestlevel of systematic risk? Show your work.
 If the riskfree rate is 5.5 percent, which of these portfolios has the highestrewardtorisk ratio? Show your work.
 Suppose that the riskfree rate is 5.5 percent, the return over three years for each portfolio matches its expected return, and the portfolios have 3year annual return standard deviations as follows:
Portfolio 1  22% 
Portfolio 2  26% 
Portfolio 3  18% 
 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?
 Suppose that the actual returns for Portfolios 1, 2, and 3 were as follows:
Portfolio 1  11.3 
Portfolio 2  12.5 
Portfolio 3  9.4 
 Also, assume that the riskfree rate was 5.5 percent and the average return on the market portfolio was 8 percent.
 Which of the three portfolios has the highestJensen’s alpha? Show your work.
 Which has the highestTreynor ratio? Show your work.
Part 3: Selecting a Portfolio
Use the two portfolios shown in the tables below to answer the questions in Part 3.
Portfolio 1  
Asset Category  Percentage of Portfolio 
U.S. smallcompany stocks  5 
U.S. largecompany stocks  10 
International stocks  5 
U.S. government bonds  50 
U.S. corporate bonds  30 
Portfolio 2  
Asset Category  Percentage of Portfolio 
U.S. smallcompany stocks  20 
U.S. largecompany stocks  30 
International stocks  25 
U.S. government bonds  15 
U.S. corporate bonds  10 
 In your role as a financial advisor, you’re advising a client, Sally, a 30year old computer programmer who makes an aboveaverage 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 notappropriate.
 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 selfdirected 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 notappropriate.
SCORING GUIDELINES
Your project will be graded according to the criteria found in the rubric below.
Rubric
Securities and Investments Graded Project 

Skill/ Grading Criteria 
Excellent  Good  Satisfactory  Poor  Grader Comments 
Part 1  
Question 1  All answers are correct. 30 
Many of the answers are correct. 29 
Some of the answers are correct. 28–26 
Few or none of the answers are correct. 25–0 

Question 2  The answer and explanation are correct, and calculations are shown. 5 
The answer is correct, but the explanation or calculations are incorrect. 4 
The answer is correct, but the calculations or explanation is not shown. 3 
The answer is incorrect, and the explanation and calculations are not shown. 2–0 

Question 3  The answer and explanation are correct. 5 
The answer is correct, but the explanation is incorrect. 4 
The answer is correct, but the explanation is not shown. 3 
The answer is incorrect and/or the explanation is not shown. 2–0 

Question 4  The answer and explanation are correct. 5 
The answer is correct, but the explanation is incorrect. 4 
The answer is correct, but the explanation is not shown. 3 
The answer is incorrect and/or the explanation is not shown. 2–0 

Part 2  
Question 5  The answer is correct and the correct calculations are shown. 10 
The answer is correct and the cal culations are incorrect, or the answer is incorrect but the calculations are correct. 9 
The answer is correct, but the calculations are not shown. 8–7 
The answer is incorrect and/or the calculations are not shown. 6–0 

Question 6  The answer is correct, and the correct calculations are shown. 10 
The answer is correct, and the cal culations are incorrect, or the answer is incorrect, but the calculations are correct. 9 
The answer is correct, but the calculations are not shown. 8–7 
The answer is incorrect and/, or the calculations are not shown. 6–0 

Question 7  The answer is correct, and the correct calculations are shown. 5 
The answer is correct, and the calculations are incorrect, or the answer is incorrect, but the calculations are correct. 4 
The answer is correct, but the calculations are not shown. 3 
The answer is incorrect and/, or the calculations are not shown. 2–0 

Question 8  The answer is correct and the correct calculations are shown. 10 
The answer is correct, and the calculations are incorrect, or the answer is incorrect, but the cal culations are correct. 9 
The answer is correct, but the calculations are notshown. 8–7 
The answer is incorrect and/, or the calculations are not shown. 6–0 

Part 3  
Question 9  The answer and explanation are both correct 10 
The answer is correct, but the explanation is incorrect. 9 
The answer is correct, but the explanation is incomplete or not shown. 8–7 
The answer is incorrect and/, or the explanation is not shown 6–0 

Question 10  The answer and explanation are both correct 10 
The answer is correct but the explanation is incorrect. 9 
The answer is correct, but the explanation is incomplete or not shown. 8–7 
The answer is incorrect and/, or the explanation is not shown 6–0 