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Expected Monthly Return Expected Monthly Return Risk Free Rate PG 0.010848 0.020000 (Annual) Microsoft 0.014854 0.001652 (Monthly) BAC 0.011589 Exxon 0.012043 Variance Variance Sigma PG

Expected Monthly Return
Expected Monthly Return Risk Free Rate
PG 0.010848 0.020000 (Annual)
Microsoft 0.014854 0.001652 (Monthly)
BAC 0.011589
Exxon 0.012043
Variance
Variance Sigma
PG 0.004478 0.066918113
Microsoft 0.012820 0.113225298
BAC 0.005611 0.074907547
Exxon 0.002820 0.053101828
Covariance
Cov(PG, Microsoft) -0.000649
Cov(PG, BAC) 0.000683
Cov(PG, Exxon) 0.000433
Cov(Microsoft, BAC) 0.001681
Cov(Microsoft, Exxon) 0.000804
Cov(BAC, Exxon) 0.000757

Assume that the yearly risk free rate is 2% (A monthly risk free rate of 0.001652). (a) Plot the minimum variance frontier for an investor who wants to allocate his money to PG, BAC, and the risk-free asset. Find the optimal risky portfolio. What are the mean and s.d. of the returns of this portfolio?

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