Costco:

average expected return = 0.018099184 variance = 0.002205806 standard deviation = 0.046966007

Tesla:

average expected return = 0.036531868 variance = 0.025566092 standard deviation = 0.159894002

Covariance 0.000448675 Correlation Coefficient 0.05974702

Assume monthly risk-free rate is 0.001. You want to allocate your investment between risk-free asset and one risky portfolio. Among all the portfolios constructed in a., which one would you choose as your risky portfolio? Please explain and show all the calculations if necessary. (5 points).

Weight in Costco r Costco Weight in Tesla r Tesla r portfolio O portfolio o^2 portfolio 0 0.018099184 1 0.036531868 0.036531868 0.159894002 0.144261408 0.025566092 0.020811354 0.036531868 0.0346886 0.018099184 0.018099184 0.036531868 0.032845332 0.016594107 0.128818116 0.113641326 0.018099184 0.036531868 0.031002063 0.012914351 0.018099184 0.036531868 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0.029158795 0.027315526 0.098853862 0.084659979 0.009772086 0.007167312 0.018099184 0.036531868 0.018099184 0.036531868 0.025472258 0.071414486 0.005100029 0.018099184 0.036531868 0.023628989 0.059751458 0.003570237 0.018099184 0.036531868 0.021785721 0.050773373 0.002577935 0.018099184 0.036531868 0.019942453 0.046077382 0.002123125 1 0.018099184 0 0.036531868 0.018099184 0.046966007 0.002205806 Weight in Costco r Costco Weight in Tesla r Tesla r portfolio O portfolio o^2 portfolio 0 0.018099184 1 0.036531868 0.036531868 0.159894002 0.144261408 0.025566092 0.020811354 0.036531868 0.0346886 0.018099184 0.018099184 0.036531868 0.032845332 0.016594107 0.128818116 0.113641326 0.018099184 0.036531868 0.031002063 0.012914351 0.018099184 0.036531868 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0.029158795 0.027315526 0.098853862 0.084659979 0.009772086 0.007167312 0.018099184 0.036531868 0.018099184 0.036531868 0.025472258 0.071414486 0.005100029 0.018099184 0.036531868 0.023628989 0.059751458 0.003570237 0.018099184 0.036531868 0.021785721 0.050773373 0.002577935 0.018099184 0.036531868 0.019942453 0.046077382 0.002123125 1 0.018099184 0 0.036531868 0.018099184 0.046966007 0.002205806