For this exercise you will use a subset of the data for Assignment 2. Take the three largest companies and the S&P (I will refer to them as asset 1, asset 2 and asset 3). We are going use this data to learn about how different portfolio choices affect your return-risk combinations with real data. We will also be able to grasp some of the complexities involved in estimating the market portfolio. We will take a "brute force" approach to estimate the investment opportunity set and the efficient frontier. Make sure to check for errors in your computations for assignment 2 by looking at the solutions so you do not carry errors to this homework (regardless of whether your grade was affected by it or not). 1. Combinations of two assets. (a) Choose asset 1 and asset 2. Compute combinations of portfolios in the investment op- portunity set with two assets using Excel by varying all possible weights in increments of 0.1, using only positive weights from a weight of 0 to a weight of 1. (Note that you will end up computing 11 portfolios for this.) Plot this series on a mean-risk graph where the mean sits on the vertical axis. Use a scatterplot. Label the points associated to each of the two pure assets (asset 1 only and asset 2 only). There is an example of the weights in 07_slides.pdf. (b) Do the same exercise with asset 1 and asset 3. Plot this series on the same graph as the previous part using a different color for the series and label the new pure asset 3. (c) Do the same exercise with asset 2 and asset 3. Plot this series on the same graph as the previous part using a third color for the new series. For this exercise you will use a subset of the data for Assignment 2. Take the three largest companies and the S&P (I will refer to them as asset 1, asset 2 and asset 3). We are going use this data to learn about how different portfolio choices affect your return-risk combinations with real data. We will also be able to grasp some of the complexities involved in estimating the market portfolio. We will take a "brute force" approach to estimate the investment opportunity set and the efficient frontier. Make sure to check for errors in your computations for assignment 2 by looking at the solutions so you do not carry errors to this homework (regardless of whether your grade was affected by it or not). 1. Combinations of two assets. (a) Choose asset 1 and asset 2. Compute combinations of portfolios in the investment op- portunity set with two assets using Excel by varying all possible weights in increments of 0.1, using only positive weights from a weight of 0 to a weight of 1. (Note that you will end up computing 11 portfolios for this.) Plot this series on a mean-risk graph where the mean sits on the vertical axis. Use a scatterplot. Label the points associated to each of the two pure assets (asset 1 only and asset 2 only). There is an example of the weights in 07_slides.pdf. (b) Do the same exercise with asset 1 and asset 3. Plot this series on the same graph as the previous part using a different color for the series and label the new pure asset 3. (c) Do the same exercise with asset 2 and asset 3. Plot this series on the same graph as the previous part using a third color for the new series