How to do it on Excel

10. When we diversify with only two assets, then it is fairly easy to write down how much weight we need to put inte each asset. When there are more than two assets, the equations are more cumbersome, and we have to turn to numerical took to find the efficient frontier. To prepare ourselves for this, we are going to explore the Excel Solver tool to determine the opportunity set of a portfolio of two stocks. Follow these instructions: - Download the daily adfusted closing prices during the time from January 1,2019, to December 31,2019, for the following two stocks: Microsoft (SMSFT) and Tella (STSLA). - Compute the daily returns using the ordinary return. - Estimate the standard deviation of the dally returns of each of the stocks. - Compute the covariance matrix and the correlation matrix. Both should have two rows and two columns. - Use the following forecasts for the annual seturns of each stock and the risk-free rate: - E[rMSNT]=9.7% - E[ras =14.5% rf=2.0% - Make sure your Excel table contains the following fields: weight of Microsoft, weight of Tesla, sum of these two weights, expected return of the portfolio with the weights, variance, standard deviation and Sharpe ratio. - Using the Solver tool, which is an Excel addon, apply the following: - The objective is the Sharpe ratio, which you want the Solver tool to maximize. - The variable cells are the weights of the stock positions. - The constraint is that the sum of the weights is equal to one; for this you need to use the cell sum. -2 . Name: Then, report the answers to the following questions: a) What are the weights of the individual stocks acconding to this optimization? b) What is the expected return and standard deviation of the portfolio? c) Compare the Sharpe ratio of the portlolio to the Sharpe ratios of the individual stocks. Use the expected returns, the given risk-free rate and the standard deviation from the data to answer this