Calculate the envelope set for the four assets below and show that the individual assets all lie within this envelope set.

You should get a graph which looks something like the following:

Transcribed Image Text:

B A FOUR-ASSET PORTFOLIO PROBLEM Variance-covariance 0.01 A Mean returns 6% 8% 10% 3 4 5 0.05 0.03 0.06 0.10 0.01 0.03 0.05 -0.04 0.02 0.30 0.06 0.40 0.02 -0.04 0.50 15% Efficient Frontier Showing the Individual Stocks 20% 18% 16% Stock D 14% 12% 10% Stock C Stock B Stock A 6% 4% 2% 20% 30% 40% 50% 60% 70% 80% Standard deviation Mean return