5. Consider the following data: Russell Fund Windsor Fund S&P Fund Expected Return Standard Deviation 16% 12% 14% 10% 12% 8% The correlation between the returns on the Russell Fund and the S&P Fund is .7. The rate of return on Treasury Bills is 6%. Which of the following portfolios would you prefer to hold in combination with Treasury Bills and why? (a) Russell Fund (b) Windsor Fund (c) S&P Fund (d) A portfolio of 60% Russell Fund and 40% S&P Fund. 6. Consider the information from the previous question. (a) What portfolio composed of the Russell and S&P funds has the lowest variance? What is the expected return on this portfolio? (Please derive the formula for a minimum variance portfolio rather than just stating the answer.) (b) What portfolio composed of the Russell and S&P funds has the highest Sharpe ratio? What is the expected return on this portfolio? (Please state the first order condition that charecterizes the portfolio with the highest Sharpe ratio, but you do not have to use it to derive a formula- the algebra is quite involved.) (c) Suppose you want to invest some money in this portfolio with the highest Sharpe ratio and some in risk free Treasury Bills. If you allocate the proportion of money into each of these two choices so that your expected return has the same variance as the portfolio you found in part a, what is your expected return