Deliverable 02 Worksheet 1. Most appropriate benchmark for each portfolio and include an explanation. Answer and Explanation: Enter your answers here. 2. Explain the implications of risk-adjusted returns, Sharpe ratios, and Treynor ratios you calculated for each portfolio. Answer and Explanation: Enter your explanations here. 3. Did each portfolio under- or over-performed in comparison to your selected benchmark based on the principles of the capital and security market lines? Use the calculations from the spreadsheet to justify your answers. Answer and Explanation: Enter your explanations here. Deliverable 02 ABC Capital Management is one of the most prestigious asset management companies in the country. It has been managing the wealth of America for over 100 years. It utilizes various forms of fundamental, technical, and quantitative analyses in the design and implementation of its several investment strategies and portfolios. Today, ABC Capital is a global investment management firm that continues to focus on rigorous research and the development of innovative, practical investment strategies. Because of this, ABC Capital is able to achieve the goals of its clients: individuals, pension funds, endowment funds, banks, insurance companies, foundations, and sovereign wealth funds. You work as a junior portfolio manager position with ABC Capital. As a part of the ongoing due diligence process, your supervisor wants to see whether you can properly assess a portfolio’s performance. The company provides you with 3 portfolios, their performance records, and 3 different benchmarks to analyze. You need to determine: Most appropriate benchmark for each portfolio and include an explanation. Risk-adjusted returns of the portfolio (Sharpe Ratio and Treynor Ratio). Whether the portfolio under- or over-performed in comparison to that benchmark based on the principles of the capital and security market lines, including the calculations to justify your answers. You will turn in your explanations in the provided Word document (a separate download). Show your calculations in this Portfolios Portfolio 1--100% Bond 1 YR 3 YR 5 YR 10 YR Annual Returns Standard Deviation 3.53 3.2 2.18 2.84 2.05 2.88 3.9 3.3 Beta 1.01 1.01 1.01 1.01 Benchmark Sharpe Ratio Treynor Ratio Portfolio 2--Blended 1 YR 3 YR 5 YR 10 YR Annual Returns Standard Deviation 13.6 6.2 5.45 6.25 6.56 6.07 4.6 10.6 Beta Benchmark Sharpe Ratio Treynor Ratio 1 1 0.98 1 Portfolio 3--100% Equity 1 YR 3 YR 5 YR 10 YR Annual Returns Standard Deviation 22.03 10.23 8.8 11.6 14.54 10.58 7.07 19.35 Benchmarks Benchmark A 1 YR 3 YR 5 YR 10 YR Annual Returns 15.69 6.78 7.59 5.23 Beta Benchmark B 1 YR 3 YR 5 YR 10 YR Annual Returns 23.97 9.3 10.8 4.65 Beta Benchmark C 1 YR 3 YR 5 YR 10 YR Annual Returns 3.54 2.24 2.1 4.01 Beta 1 1 1 1 1 1 1 1 1 1 1 1 Beta 0.94 0.71 0.66 0.94 Benchmark Sharpe Ratio Treynor Ratio Expected Returns Instructions: Select the appropriate benchmark, and calculate the Sharpe Ratio, Treynor Ratio, and Expected Return for each time period. Expected Returns Expected Returns
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