2. Use the 25 years of historical asset returns for 3 risky assets from the previous problem set [Mean-Variance Portfolio Choice 1] to estimate the vector of expected returns and the covariance matrix (use 25 instead of 24 when computing the covariances). Again assume that there is a riskfree asset paying a constant return of 5%. (A) Consider three investors with different degrees of risk aversion y equal to 0.5, 1.85, and 3.7, respectively. Each starts with $100,000 to invest. For each investor, calculate the vector of optimal portfolio weights =[w, w, wz wa], the dollar amounts long or short in the 4 assets, and the resulting portfolio expected return and standard deviation. Plot them in a plane with expected return on the vertical axis and standard deviation on the horizontal axis. (B) Suppose your parents have $100,000 to invest in these 4 assets, and come to you for advice. What are some practical problems you would have to overcome in order to recommend a portfolio via the method used in Question 2? 2. Use the 25 years of historical asset returns for 3 risky assets from the previous problem set [Mean-Variance Portfolio Choice 1] to estimate the vector of expected returns and the covariance matrix (use 25 instead of 24 when computing the covariances). Again assume that there is a riskfree asset paying a constant return of 5%. (A) Consider three investors with different degrees of risk aversion y equal to 0.5, 1.85, and 3.7, respectively. Each starts with $100,000 to invest. For each investor, calculate the vector of optimal portfolio weights =[w, w, wz wa], the dollar amounts long or short in the 4 assets, and the resulting portfolio expected return and standard deviation. Plot them in a plane with expected return on the vertical axis and standard deviation on the horizontal axis. (B) Suppose your parents have $100,000 to invest in these 4 assets, and come to you for advice. What are some practical problems you would have to overcome in order to recommend a portfolio via the method used in Question 2