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2) Calculate the envelope set (frontier) for the following four assets and show that the individual assets all lie within this envelope set. 8 B D E 1 F G 2 fx A FOUR-ASSET PORTFOLIO PROBLEM Variance covariance 0.1 0.01 0.01 0.3 0.03 0.06 0.05 -0.04 3 4 5 0.03 0.06 0.4 0.02 0.05 -0.04 0.02 0.5 Mean returns 6% 8% 10% 15% St. der. 31.62% 54.77% 63.25% 70.71% 6 7 Constant 0.05 10 Portfolio 1 11 Z Portfolio 2 2 12 13 15 Mean Vanance Covariance 30 Proportion 1 Portfolio mean Portfolio Portfolios de Detable o porti Vario Portion B 30 D E Varying Proportion of 1 Sigma 31 32 Mean 33 34 35 36 37 38 39 -1.4 -1.15 -0.9 0.65 -0.4 -0.15 0.1 0.35 0.6 0.85 1.1 1.35 1.6 1.85 40 41 42 43 45 45 47 2.1 18 2.35 2.6 2.85 50 5 Stock A Stock B Stock C Stock D 31.62% 54.77% 63,25% 70.71% 6.00% 8.00% 10.00% 15.00% 2) Calculate the envelope set (frontier) for the following four assets and show that the individual assets all lie within this envelope set. 8 B D E 1 F G 2 fx A FOUR-ASSET PORTFOLIO PROBLEM Variance covariance 0.1 0.01 0.01 0.3 0.03 0.06 0.05 -0.04 3 4 5 0.03 0.06 0.4 0.02 0.05 -0.04 0.02 0.5 Mean returns 6% 8% 10% 15% St. der. 31.62% 54.77% 63.25% 70.71% 6 7 Constant 0.05 10 Portfolio 1 11 Z Portfolio 2 2 12 13 15 Mean Vanance Covariance 30 Proportion 1 Portfolio mean Portfolio Portfolios de Detable o porti Vario Portion B 30 D E Varying Proportion of 1 Sigma 31 32 Mean 33 34 35 36 37 38 39 -1.4 -1.15 -0.9 0.65 -0.4 -0.15 0.1 0.35 0.6 0.85 1.1 1.35 1.6 1.85 40 41 42 43 45 45 47 2.1 18 2.35 2.6 2.85 50 5 Stock A Stock B Stock C Stock D 31.62% 54.77% 63,25% 70.71% 6.00% 8.00% 10.00% 15.00%