c) Erlich decided to invest $78,000 in Intel, $120,000 in Oracle, $60,000 in Yahoo!, and the rest in ebay. What is the portfolio weight in each stock? d) What is the expected value of Erlichss $300,000 investment next year? 5 e) You tell Erlich that he might be able to do better if he had more information about the extent to which all of the assets in his portfolio moved together. Set up but do not calculate the covariance between returns on INTC and EBAY. f) If you were to calculate the variance-covariance matrix of returns for Erlichs portfolio, how many variance terms would you have? g) How many unique covariance terms would you have?

2. (21 points) Erlich just received $300,000 from his stake in the company that developed Carrr Matey, an app to tell you where you parked your car in a pirate voice. Despite his coding prowess, carpal tunnel syndrome prevents him from executing his own entrepreneurial ventures, so he decides to invest the money in stocks rather than projects. He read a little about portfolio choice, but needed more inspiration from a road trip and asked you to finish the work in exchange for a month of free rent at his incubator. He had started to compute the expected return of each asset in his portfolio using the following historical price data for Intel (INTC), Oracle (ORCL), Yahoo! (YHOO), ebay (EBAY). INTC YHOO EBAY Dividend Year Price Price Dividend HPR Price HPR 2013 30 40 0 0% 2014 2015 2016 2017 Dividend 1 1 1 1 1 32 31 30 35 ORCL Price Dividend 20 0 25 0 | 30 0 33 0 370 HPR --- 10% % 0% 20% 0 HPR -- 25% 20% 10% 12.121% 10 9 9 6 1 1 1 2 2 2 0% 11.111% -11.111% 40 44 55 72.6 0 0 0. 0 10% 25% E(r) 7.50% 16.78% a) In the space below, calculate the missing holding period returns for each stock in the table. b) In the space below, calculate the expected return next year of each stock. (Note that Erlich calculated E(TINTC) = 7.500% and E(r_ORCL) = 16.780% before his trip.)