Based on your work in Parts 1, 2, and 3, which portfolio is the best? -Assuming you can tolerate a volatility of 3%, what should your weight be in stock A, stock B, stock C, and the risk free asset? -Using your average return as your best guess of the expected return, what is the expected return on your optimal portfolio? Portfolio 1 (25% A; 25% B; 50% C) Expected Return 6.83% Calculation (.25*.03)+(.25*.1433)+(.50*.05)=.0683 Variance 1.60% Calculation (.25*.50)+(.25*.0632)+(.50*.0436)+(3*0)=.01599 Standard Deviation 12.65% Calculation .0160 Sharpe ratio 2.88 Calculation .0683-.005/.1265=.02877 Portfolio 2 (25% A; 50% B; 25% C) Expected Return 9.17% Calculation (.25*.03)+(.50*.1433)+(.25*.05)=.0917 Variance 1.67% Calculation (.25*.50)+(.50*.0632)+(.25*.0436)+(3*0)=.01674 Standard Deviation 12.92 Calculation .0167 Sharpe ratio 5.30 Calculation .0917-.005/.1292=.05300 Portfolio 3 (50% A; 25% B; 25% C) Expected Return 6.33% Calculation (.50*.03)+(.25*.1433)+(.25*.05)=.0633 Variance 6.29% Calculation (.50*.50)+(.25*.0632)+(.25*.0436)+(3*0)=.06286 Standard Deviation 25.08 Calculation .0629 Sharpe ratio 4.34 Calculation .0633-.005/.2508=.04336