1 Implementing MPT The file HW3data.csv contains monthly historical returns of 5 industry portfolios from July 1926 to December 2014. (Source: Professor Kenneth French's website.) Note: this is that same data that you used in Question 3 of Problem Set 2. (a) Compute the annualized expected returns and covariance matrix. (Hint: Estimate the expected returns and covariance matrix of monthly returns first, then multiply them by 12.) Note: this is the same question as 3(a) on Problem Set 2. (b) Assume that the risk-free rate is 3%. Find the MVE portfolio weights and compute its Sharpe Ratio. (c) You have been hired to manage the portfolio of a mean-variance investor with a coefficient of risk aversion y = 3. You have decided to invest in these 5 industry portfolios and the risk free asset. Find the optimal portfolio weights for the investors and compute the Sharpe Ratio of the portfolio. (d) How does the Sharpe Ratio in part (b) compare to the one in part (c)? Explain