In worksheet "Task 1" of the Excel file provided, model a two-asset portfolio and

examine the risk and return characteristic of a two-asset portfolio - using the data

provided. In this worksheet, evaluate the portfolio's return, risk and utility of the

following three scenarios, assume the risk-aversion coefficient to be 6:

i) When correlation coefficient between the two assets is -1.0

ii) When correlation coefficient between the two assets is 0.5

i) When correlation coefficient between the two assets is 1.0

Examining Risk and Return Characteristics of a Two Asset Portfolio Profile of Individual Assets Expected Standard Asset Return Deviation 15% 10% 30% 15% lation coefficient of returns between the assets = Risk aversion Coefficient = Heights Portfolio Portfolio Standard Expected Return on the portfolio # Asset 1 Asset 2 Deviation Return Utility 200% -100% 120% 190% -90% 100% 180% -80% 170% -70% 80% 160% -60% 60% 150% -50% 140% -40% Return % 40% 130% -30% 20% 120% -20% 110% -10% 0% 11 100% 0% 0% 20% 40% 60% 80% 100% 120% 12 90% 10% Risk (Standard Deviation) % 13 30% 20% 14 70% 30% 15 60% 40% 16 50% 50% 17 40% 60% Utility on the portfolio 18 30% 70% 120% 19 20% 20 10% 90% 100% 21 0% 100% 80% 22 -10% 1 10% 23 -20% 120 Utilitly 09 24 -30% 130% 40% 25 -40% 140% 26 -50% 150% 20% 27 -60% 160% 0% 28 -70% 170% 0% 20% 40% 50% 30% 100% 120% 29 -80% 180% 30 -90% 190% Risk (Standard Deviation) % 31 -100% 200%