21. In the following table, you will find annual return data for six high-tech companies between the years 1997 and 2007. Use the information below to compute the variance - covariance matrix of the returns. 1 2 3 4 5 6 7 8 9 10 11 A 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 12 13 14 15 Beta 16 Mean returns B C D E Data for 6 High-Tech Companies INTC MSFT 36.67% CSCO DELL IBM 41.54% 21.92% 26.13% 0.20% 61.43% 195.09% 62.27% 73.38% -1.27% 45.15% 81.17% 24.27% 19.83% 10.73% 122.82% 14.44% 63.51% -38.38% 21.39% 28.42% 1.30% 45.36% -7.44% 21.89% 20.19% 48.27% 9.11% -10.21% -11.92% -8.94% -11.28% 12.65% 13.77% 27.02% -11.64% 20.29% 12.85% 12.08% 2.42% -17.13% 6.90% 3.62% 22.21% 33.46% 7.06% 32.55% -7.55% -6.48% 1.31% 50.12% -5.54% 84.40% 5.71% 34.08% 0.80 29.24% F 0.95 0.65 0.85 0.85 20.68% 25.02% 31.64% 15.34% G GOOG 22.50% 117.89% 7.80% 38.14% 54.48% 26.82% -6.24% 123.03% 15.48% 19.92% 62.76% H 1.40 43.87%

21. In the following table, you will find annual return data for six high-tech companies between the years 1997 and 2007. Use the information below to compute the variance - covariance matrix of the returns. 22. Use the data from question 21 , and calculate the variance - covariance matrix with the single-index model. You may assume that the variance of the S\&P 500 index (market portfolio) is 18%. In other words, the variances of each stock remain the same as in question 21 , but the covariances (outside the main ciagonal) are adjusted (multiplied) by the market index variance (a sort of a shrinkage factor)