1. The expected return assuming that the past returns represent the expected future returns

2. Calculate the standard deviation of each portfolio

3. Calculate the expected return for a portfolio weight 50% in each security

4. Calculate the standard deviation of the portfolio from a combination of the two assets

5. Calculate the minimum variance portfolio for a combination of the two assets

6. Plot the efficient frontier including the minimum variance portfolio

FIGURE 1.1 A $1 Investment in Different Types of Portfolios: 1926-2015 (Year-end 1925 $1) 100,000 $24,113.43 10,000 Small-company stocks $4,954.81 1,000 Large-company stocks $120.90 100 Long-termm government bonds Treasury bills $22.42 $13.21 10 Inflation 0.10 1926 1936 1946 1956 1966 1976 1986 1996 2006 2016 Year-end Average Annual Returns and Risk Premiums: 1926-2015 TABLE 1.4 Average Return Risk Premium Investment Large-company stocks Smal1-company stocks Long-term corporate bonds Long-term government bonds U.S. Treasury bills 11. 9% 17.5 6.5 6.2 3.6 8.3% 13.9 2.9 2.6 0.0