(Statistics for assets and portfolio, finding the market portfolio, Sharpe ratio)

Given the year-end prices of the shares of IBM and Coca-Cola (COKE), answer the following questions:

a. For the years 2003–2014, calculate the following statistics for the two shares: average annual return, variance and standard deviation of returns, covariance of returns, and correlation coefficient.

b. Calculate the returns and standard deviations for portfolios composed of these two stocks.

c. Find the market portfolio using the Sharpe ratio, assuming the riskfree asset return is 4%.

d. Is your answer to part c the minimum variance portfolio? If not, calculate the Sharpe ratio of the minimum variance portfolio as well.

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A B 1 ADJUSTED PRICES OF IBM AND COCA COLA STOCK 23456789 Date 2-Jan-2003 IBM COKE 64.56 54.74 2-Jan-2004 82.55 41.51 3-Jan-2005 78.31 44.66 3-Jan-2006 68.79 38.22 3-Jan-2007 85.02 54.38 2-Jan-2008 93.14 53.01 2-Jan-2009 81.09 40.55 10 4-Jan-2010 110.45 46.49 11 12 14 15 12345 3-Jan-2011 149.00 50.71 3-Jan-2012 180.14 58.22 2-Jan-2013 193.13 62.98 2-Jan-2014 171.29 67.48 2-Jan-2015 152.24 97.54