1 Calculation of returns and standard deviations of portfolio of four stocks

Following the process on Excel described below:

1/ You must calculate the average monthly return and standard deviation for each of the four stocks. You calculated them already for the first two stocks, so you must do the same also with stock 3 and stock 4.

2/ You have to calculation the covariance of each stock with each of the three other stocks.

3/ Calculate the return, variance, and standard deviation of the following two portfolios (A and B):

w1w2w3w4

Portfolio A0.250.250.40.1

Portfolio B0.100.200.200.5

4/ Find the return and standard deviation of the portfolio composed of portfolio A and portfolio B for each of the cases when the proportion of portfolio A in the portfolio varies from -50% to 150% (increments of 10%) like you did in homework 2.

5/ Draw the graph showing the different portfolio in the Markowitz graph.

Incorporate the four stocks in the graph.

6/ Looking at that chart, can you conclude if the set of possible portfolio is on the Markowitz frontier, meaning if the superior part of that curve is the series of portfolio that are efficient using the four stocks you have?