please display answers on the Answer Sheet

Question #1: Capital Allocation:

Consider the following capital market: a risk-free asset yielding 2.00% per year and a mutual fund consisting of 80% stocks and 20% bonds. The expected return on stocks is 12.25% per year and the expected return on bonds is 3.25% per year. The standard deviation of stock returns is 33.00% and the standard deviation of bond returns 10.50%. The stock, bond and risk-free returns are all uncorrelated.

1. What is the expected return on the mutual fund?

2. What is the standard deviation of returns for the mutual fund?

Now, assume the correlation between stock and bond returns is 0.35 and the correlations between stock and risk-free returns and between the bond and risk-free returns are 0 (by construction, correlations with the risk-free asset are always zero).

3. What is the standard deviation of returns for the mutual fund? Is it higher or lower than the standard deviation found in part 2? Why?

Now, assume that the standard deviation of the mutual fund portfolio is exactly 27.75% per year and a potential customer has a risk-aversion coefficient of 2.75.

4. What correlation between the stock and bond returns is consistent with this portfolio standard deviation?

5. What is the optimal allocation to the risky mutual fund (the fund with exactly 27.75% standard deviation) for this investor?

6. What is the expected return on the complete portfolio?

7. What is the standard deviation of the complete portfolio?

8. What is the Sharpe ratio of the complete portfolio?

Question #2:MarkowitzOptimization:

Open the associated Excel file named QPS2 Data Winter I 2017 Problem 2 in My Course Content: Problem Set Spreadsheets. The data file includes 60 months of returns for 11 exchange traded funds; their names and ticker symbols follow:

	Ticker	Name of Exchange Traded Fund
1	SPY	SPDR S&P 500 ETF
2	MDY	SPDR S&PMidCap400 ETF
3	IWM	iSharesRussell 2000 ETF
4	QQQ	Power Shares QQQ ETF
5	EFA	iSharesMSCI EAFE ETF
6	VWO	Vanguard FTSE Emerging Markets Stock Index ETF
7	VNQ	Vanguard REIT Index ETF
8	BND	Vanguard Total Bond Market ETF
9	PFF	iSharesUS Preferred Stock ETF
10	GLD	SPDR Gold Shares ETF
11	JNK	SPDRBarclaysHigh Yield Bond ETF

All students will do problem 2 using 9 of the aboveETFs; all students will include the first 8ETFslisted above: SPY, MDY, IWM, QQQ, EFA, VWO, VNQ, and BND. All students will include one of the last 3ETFs: PFF, GLD, and JNK as instructed on your version.

Version A: IncludePFFand exclude GLD and JNK.

Use the data on your9ETFsto answer the following questions:

1.What is the average return for each of the nine indexes?

2.Show the covariance matrix of returns. Briefly describe how you constructed the covariance matrix.

Consider the simple case where short sales are allowed, but short positions must be greater than or equal to 60% and long positions must be less than or equal to 60%. Use Excel Solver to find the Minimum Variance Portfolio (MVP).

3.What is the expected portfolio return for the MVP portfolio?

4.What is the portfolio standard deviation for the MVP portfolio?

5.What is the portfolio composition (i.e., what are the weights for the nineETFs)?

Consider the simple case where short sales are allowed, but short positions must be greater than or equal to 40% and long positions must be less than or equal to 40%. Use Excel Solver to find the Maximum return portfolio with a standard deviation of exactly 3.50%.

6.What is the expected portfolio return for this portfolio?

7.What is the portfolio composition (i.e., what are the weights for the nineETFs)?

Consider the more realistic case where short sales are NOT allowed and no more than 35% of the portfolio and no less than 6% is invested in any ETF. Use Excel Solver to find the Minimum Variance Portfolio (MVP).

8.What is the expected portfolio return for the MVP portfolio?

9.What is the portfolio standard deviation for the MVP portfolio?

10.What is the portfolio composition (i.e., what are the weights for the nineETFs)?

Consider the simple case where short sales are NOT allowed and no more than 20% and no less than 2% of the portfolio is invested in any ETF. Use Excel Solver to find the Market Portfolio if the risk-free rate is 0.20%/month (2.40%/year).

11. What is the expected portfolio return for this portfolio?

12. What is the portfolio standard deviation for this portfolio?

13. What is the portfolio composition (i.e., what are the weights for the nineETFs)?

14. What is the maximum Sharpe ratio?

FIN 5550 - Jack De Jong: Winter I 2016 Data for Problem 2 on QPS #2 Ticker 1 SPY 2 MDY 3 IWM 4 QQQ 5 EFA 6 VWO 7 VNQ 8 BND 9 PFF 10 GLD 11 JNK Name of Exchange Traded Fund SPDR S&P 500 ETF SPDR S&P MidCap 400 ETF iShares Russell 2000 ETF Power Shares QQQ ETF iShares MSCI EAFE ETF Vanguard FTSE Emerging Markets Stock Index ETF Vanguard REIT Index ETF Vanguard Total Bond Market ETF iShares US Preferred Stock ETF SPDR Gold Shares ETF SPDR Barclays High Yield Bond ETF Adjusted Closing Prices: Date SPY MDY 40878 $ 113.22 $ 149.81 40911 $ 118.47 $ 159.68 40940 $ 123.62 $ 166.89 40969 $ 127.59 $ 170.10 41001 $ 126.74 $ 169.62 41030 $ 119.13 $ 158.67 41061 $ 123.96 $ 161.74 41092 $ 125.43 $ 161.70 41122 $ 128.57 $ 167.43 41156 $ 131.83 $ 170.26 41183 $ 129.43 $ 168.68 41214 $ 130.16 $ 172.56 41246 $ 131.33 $ 176.51 41276 $ 138.05 $ 189.00 41306 $ 139.81 $ 190.57 41334 $ 145.12 $ 199.80 41365 $ 147.91 $ 200.99 41395 $ 151.40 $ 205.59 41428 $ 149.38 $ 200.88 41456 $ 157.10 $ 214.27 41487 $ 152.39 $ 205.99 41520 $ 157.21 $ 217.02 41548 $ 164.49 $ 224.88 41579 $ 169.37 $ 227.67 41610 $ 173.76 $ 234.86 41641 $ 167.63 $ 229.65 41673 $ 175.26 $ 240.81 IWM $ 68.29 $ 73.17 $ 75.05 $ 76.91 $ 75.67 $ 70.69 $ 74.26 $ 73.13 $ 75.72 $ 78.19 $ 76.49 $ 76.91 $ 79.70 $ 84.67 $ 85.52 $ 89.50 $ 89.19 $ 92.70 $ 91.94 $ 98.68 $ 95.56 $ 101.76 $ 104.22 $ 108.35 $ 110.54 $ 107.47 $ 112.61 QQQ $ 52.56 $ 56.98 $ 60.64 $ 63.70 $ 62.95 $ 58.52 $ 60.64 $ 61.25 $ 64.42 $ 64.99 $ 61.56 $ 62.37 $ 62.08 $ 63.74 $ 63.96 $ 65.89 $ 67.56 $ 69.98 $ 68.30 $ 72.62 $ 72.33 $ 75.82 $ 79.58 $ 82.41 $ 84.82 $ 83.19 $ 87.48 EFA $ 42.51 $ 44.75 $ 46.92 $ 47.12 $ 46.14 $ 41.00 $ 43.88 $ 43.92 $ 45.32 $ 46.55 $ 47.06 $ 48.37 $ 50.49 $ 52.37 $ 51.70 $ 52.37 $ 55.00 $ 53.34 $ 51.91 $ 54.68 $ 53.61 $ 57.80 $ 59.69 $ 60.01 $ 61.32 $ 58.13 $ 61.69 VWO $ 33.45 $ 37.06 $ 39.07 $ 38.06 $ 37.26 $ 33.29 $ 34.96 $ 35.03 $ 35.12 $ 36.98 $ 36.78 $ 37.25 $ 39.88 $ 39.91 $ 38.96 $ 38.47 $ 39.24 $ 37.25 $ 35.26 $ 35.50 $ 34.28 $ 36.78 $ 38.37 $ 38.02 $ 37.91 $ 34.71 $ 35.83 VNQ $ 47.29 $ 50.31 $ 49.73 $ 52.31 $ 53.81 $ 51.38 $ 54.22 $ 55.30 $ 55.30 $ 54.27 $ 53.77 $ 53.63 $ 55.63 $ 57.71 $ 58.41 $ 60.09 $ 64.13 $ 60.30 $ 59.10 $ 59.64 $ 55.47 $ 57.41 $ 60.00 $ 56.85 $ 56.91 $ 59.34 $ 62.35 BND $ 73.34 $ 73.80 $ 73.83 $ 73.46 $ 74.27 $ 74.96 $ 75.01 $ 75.93 $ 76.06 $ 76.19 $ 76.12 $ 76.16 $ 75.49 $ 74.97 $ 75.37 $ 75.43 $ 76.20 $ 74.73 $ 73.50 $ 73.78 $ 73.15 $ 73.96 $ 74.60 $ 74.38 $ 73.90 $ 75.05 $ 75.40 41701 41730 41760 41792 41821 41852 41884 41913 41946 41974 42006 42037 42065 42095 42125 42156 42186 42219 42248 42278 42310 42339 42373 42401 42430 42461 42492 42522 42552 42583 42614 42646 42675 42705 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 176.72 177.94 182.07 185.83 183.34 190.57 187.94 192.37 197.65 197.15 191.31 202.06 198.89 200.84 203.43 199.29 203.80 191.37 186.49 202.35 203.09 199.58 189.65 189.49 202.24 203.03 206.49 207.21 214.76 215.02 215.03 211.30 219.09 223.53 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 241.64 238.05 241.94 252.03 240.98 253.18 241.68 250.21 254.81 256.93 254.11 266.89 270.45 266.46 270.88 267.38 267.67 252.51 244.43 258.00 261.45 250.48 236.60 239.53 259.85 262.95 268.85 270.11 281.57 282.86 281.19 273.72 295.30 301.73 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 111.76 107.58 108.42 114.14 107.23 112.41 105.74 112.71 112.84 116.10 112.30 118.98 121.08 117.98 120.62 121.56 120.22 112.63 107.07 113.09 116.78 110.90 101.39 101.16 109.27 111.10 113.59 113.57 120.24 122.39 123.70 118.01 131.07 134.85 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 85.08 84.81 88.62 91.39 92.47 97.10 96.36 98.91 103.41 101.09 98.98 106.13 103.63 105.62 107.99 105.31 110.11 102.60 100.33 111.74 112.42 110.63 102.98 101.37 108.32 104.87 109.45 106.95 114.60 115.81 118.37 116.65 117.15 118.48 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 61.41 62.43 63.43 64.01 62.35 62.46 60.03 59.87 59.91 57.52 57.88 61.55 60.67 62.88 63.00 61.04 62.28 57.65 55.11 58.75 58.31 56.95 53.81 52.01 55.44 56.67 56.62 55.25 57.45 57.75 58.52 57.23 56.21 57.73 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 37.49 37.83 39.00 40.24 40.79 42.35 39.32 40.20 39.75 37.89 37.82 39.58 38.76 41.64 40.16 39.13 36.68 33.06 32.11 33.81 33.03 31.90 30.06 29.97 33.78 34.12 33.02 34.64 36.42 36.71 37.45 37.57 36.05 35.78 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 62.66 64.72 66.27 67.02 67.07 69.11 64.94 71.39 72.82 74.21 79.29 76.38 77.70 73.16 72.94 69.53 73.54 68.92 71.03 75.12 74.65 76.01 73.40 73.13 80.79 78.89 80.66 86.25 89.93 86.54 84.96 80.08 78.74 82.53 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 75.27 75.88 76.68 76.74 76.53 77.40 76.96 77.51 78.16 78.20 80.08 79.04 79.47 79.21 78.82 77.94 78.62 78.43 79.07 79.09 78.78 78.64 79.58 80.26 80.97 81.30 81.29 82.93 83.43 83.17 83.26 82.48 80.36 80.62 Monthly Returns in %: Date SPY MDY IWM QQQ EFA VWO VNQ BND 40911 0.0463745 0.0658975 0.0714576 0.0841841 0.052695 0.107825 0.063793 0.006344 40940 0.0434054 0.0451176 0.0256897 0.0641005 0.048331 0.054335 -0.011507 0.000406 40969 0.0321638 0.0192509 0.0248471 0.0505305 0.004208 -0.025992 0.052002 -0.005077 41001 -0.006676 -0.002822 -0.016182 -0.011695 -0.020769 -0.020934 0.028594 0.011036 41030 -0.060056 -0.064539 -0.065791 -0.070401 -0.111442 -0.106673 -0.045059 0.009316 41061 0.0405811 0.0193258 0.0505211 0.0362145 0.070433 0.050237 0.055171 0.000664 41092 0.0118295 -0.000234 -0.015209 0.0099751 0.000801 0.002003 0.020021 0.012317 41122 0.0250526 0.0354432 0.0353542 0.0518518 0.032 0.002499 -0.00015 0.001611 41156 41183 41214 41246 41276 41306 41334 41365 41395 41428 41456 41487 41520 41548 41579 41610 41641 41673 41701 41730 41760 41792 41821 41852 41884 41913 41946 41974 42006 42037 42065 42095 42125 42156 42186 42219 42248 42278 42310 42339 42373 42401 42430 42461 42492 0.0253509 -0.018198 0.0056597 0.0089344 0.0511902 0.0127589 0.0379712 0.0192122 0.0236097 -0.013344 0.0516769 -0.029992 0.0316465 0.0463068 0.0296377 0.0259265 -0.035248 0.0455158 0.0082956 0.0069515 0.0232064 0.0206449 -0.013438 0.0394636 -0.013796 0.0235509 0.027472 -0.002537 -0.029629 0.0562046 -0.015706 0.0098339 0.0128561 -0.020312 0.0225893 -0.06095 -0.025516 0.0850597 0.0036552 -0.017283 -0.049787 -0.000826 0.0672661 0.0039412 0.0170116 0.0168843 -0.009282 0.0230014 0.0228646 0.0708093 0.0082972 0.0484323 0.0059603 0.0228943 -0.022951 0.0666825 -0.038642 0.0535494 0.0361861 0.0124083 0.0315949 -0.022195 0.0486221 0.0034497 -0.014886 0.0163669 0.0417161 -0.043867 0.050616 -0.045397 0.035296 0.0183635 0.0083305 -0.010986 0.050293 0.0133304 -0.014753 0.016621 -0.012931 0.0010613 -0.056638 -0.031981 0.0555265 0.0133607 -0.041972 -0.055385 0.0123766 0.0848337 0.0119138 0.0224563 0.0326093 -0.021692 0.0055127 0.0361885 0.0623815 0.0100469 0.0465904 -0.003495 0.03932 -0.00818 0.0733416 -0.031642 0.0648913 0.0242003 0.0395641 0.0202113 -0.027739 0.0477888 -0.007485 -0.037476 0.0078585 0.0527202 -0.060543 0.0482956 -0.059279 0.0659351 0.0011153 0.0289294 -0.03277 0.0594642 0.0176999 -0.025649 0.0223634 0.0078295 -0.011039 -0.06311 -0.049363 0.0562271 0.0325993 -0.050304 -0.085775 -0.002234 0.0801343 0.0167225 0.022404 0.0088842 0.027132 0.053103 -0.018632 0.001812 -0.052793 0.010943 -0.005513 -0.009081 -0.001012 0.0130871 0.027809 0.012774 -0.002641 0.000589 -0.00467 0.043812 0.070671 0.037227 -0.008765 0.0267159 0.037285 0.000674 0.037386 -0.006902 0.0034394 -0.012886 -0.023564 0.012159 0.005355 0.0302477 0.013054 -0.012665 0.028722 0.00079 0.0253734 0.050186 0.020047 0.067347 0.010152 0.0357748 -0.030191 -0.050731 -0.059777 -0.019258 -0.023953 -0.026779 -0.053549 -0.019819 -0.016477 0.0631402 0.053229 0.006961 0.009022 0.003804 -0.003959 -0.019553 -0.034306 -0.069801 -0.008583 0.0483219 0.078249 0.07275 0.034819 0.011139 0.049569 0.032602 0.043359 0.045207 0.008574 0.0355116 0.005464 -0.009314 -0.05251 -0.002943 0.029271 0.021761 -0.002846 0.001019 -0.006368 -0.019213 -0.052012 -0.084346 0.042751 0.01549 0.0515243 0.061311 0.032387 0.050654 0.004697 -0.027336 -0.004592 0.046274 0.004969 -0.001697 -0.003194 0.016667 0.008871 0.032852 0.008025 0.0448564 0.015954 0.031021 0.023992 0.010531 0.0312382 0.009208 0.03173 0.011341 0.00084 0.0118197 -0.026035 0.01368 0.000802 -0.002779 0.0500948 0.001802 0.038426 0.030441 0.011415 -0.007566 -0.038825 -0.071658 -0.060406 -0.005716 0.0264197 -0.002651 0.022297 0.099374 0.007228 0.0454635 0.000626 -0.011023 0.020003 0.00831 -0.022406 -0.039928 -0.046803 0.019039 0.000568 -0.020823 0.006246 -0.001999 0.068519 0.024038 0.0722058 0.063378 0.04657 -0.036742 -0.013067 -0.02359 -0.014286 -0.020553 0.017319 0.005451 0.0192235 0.036466 0.074138 -0.058475 -0.003234 0.0224845 0.001955 -0.035535 -0.003023 -0.004967 -0.024841 -0.03118 -0.025529 -0.046686 -0.011123 0.0455776 0.020318 -0.062622 0.057705 0.008792 -0.068245 -0.074251 -0.098643 -0.062911 -0.002462 -0.022073 -0.044189 -0.028813 0.030596 0.008096 0.1136989 0.06612 0.052886 0.057585 0.000293 0.0060883 -0.007527 -0.022962 -0.006259 -0.003933 -0.015948 -0.023319 -0.034368 0.01831 -0.001762 -0.069104 -0.055177 -0.057475 -0.034366 0.012011 -0.015653 -0.033345 -0.003244 -0.003637 0.008509 0.0685261 0.065821 0.127207 0.104654 0.008832 -0.031868 0.022218 0.010121 -0.023508 0.00403 0.0437002 -0.000856 -0.03235 0.022486 -7E-005 42522 42552 42583 42614 42646 42675 42705 0.0034758 0.0364713 0.0011975 5.80E-005 -0.017337 0.0368384 0.0202718 0.0046664 0.0424273 0.004581 -0.005889 -0.02657 0.0788296 0.0217865 -0.000174 0.0587488 0.017841 0.0107384 -0.045971 0.1106329 0.0288444 -0.02278 -0.024194 0.049236 0.069284 0.020198 0.0715083 0.039771 0.051377 0.04263 0.00599 0.0105007 0.005341 0.007829 -0.037642 -0.003137 0.0221353 0.013368 0.020207 -0.018326 0.001142 -0.014572 -0.022155 0.003189 -0.057413 -0.009395 0.0043594 -0.017814 -0.04053 -0.016756 -0.025739 0.0113224 0.027063 -0.007383 0.048171 0.003299 PFF $ 26.39 $ 28.26 $ 29.12 $ 29.17 $ 29.23 $ 28.89 $ 29.59 $ 30.04 $ 30.48 $ 30.70 $ 31.02 $ 30.91 $ 31.03 $ 31.44 $ 31.61 $ 31.97 $ 32.30 $ 32.09 $ 31.38 $ 31.21 $ 30.53 $ 30.74 $ 31.02 $ 31.12 $ 30.72 $ 31.63 $ 32.35 GLD $ 151.99 $ 169.31 $ 164.29 $ 162.12 $ 161.88 $ 151.62 $ 155.19 $ 156.49 $ 164.22 $ 171.89 $ 166.83 $ 166.05 $ 162.02 $ 161.20 $ 153.00 $ 154.45 $ 142.77 $ 133.92 $ 119.11 $ 127.96 $ 134.62 $ 128.18 $ 127.74 $ 120.70 $ 116.12 $ 120.09 $ 127.62 JNK $ 28.25 $ 29.00 $ 29.62 $ 29.26 $ 29.71 $ 28.67 $ 29.87 $ 30.37 $ 30.75 $ 30.98 $ 31.25 $ 31.42 $ 31.88 $ 31.96 $ 32.19 $ 32.53 $ 33.20 $ 32.44 $ 31.72 $ 32.53 $ 32.19 $ 32.50 $ 33.31 $ 33.57 $ 33.74 $ 33.94 $ 34.72 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 32.91 33.52 33.94 34.14 33.98 34.58 34.30 34.66 35.09 35.05 35.51 35.86 35.97 35.97 35.97 35.60 36.09 35.82 35.57 36.34 36.58 36.55 36.19 36.21 37.08 37.40 37.98 38.43 38.97 38.97 38.56 38.18 36.91 37.02 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 123.61 124.22 120.43 128.04 123.39 123.86 116.21 112.66 112.11 113.58 123.45 116.16 113.66 113.47 114.10 112.37 104.93 108.82 106.86 109.30 101.92 101.46 106.95 118.64 117.64 123.65 116.06 126.47 128.98 124.78 125.64 121.94 111.75 109.61 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 34.71 34.91 35.23 35.56 34.72 35.59 34.72 35.04 34.53 34.00 34.29 35.20 34.87 35.23 35.38 34.66 34.41 33.71 32.64 33.56 32.69 31.70 31.05 31.42 32.37 33.55 33.83 34.45 34.99 35.64 35.82 35.55 35.59 36.28 PFF GLD JNK 0.070747 0.1139548 0.026528 0.03045 -0.02965 0.021297 0.001771 -0.013208 -0.012144 0.002239 -0.00148 0.015385 -0.011686 -0.06338 -0.034799 0.024194 0.0235458 0.041903 0.015068 0.0083768 0.016724 0.014796 0.0493961 0.012358 0.007329 0.010162 -0.003495 0.003913 0.013377 0.005305 0.01123 0.010534 -0.006577 -0.022059 -0.005419 -0.021885 0.006809 0.009247 0.003233 -0.012933 0.029595 0.0228 0.017466 0.018385 0.012475 0.006126 -0.004959 0.017871 -0.008256 0.010679 0.012361 -0.001202 0.013185 0.009756 0.003001 0.00015 -0.000151 -0.010084 0.013639 -0.007502 -0.00687 0.021624 0.006674 -0.000981 -0.009781 0.000653 0.023791 0.008806 0.015437 0.0467056 0.00734 -0.029437 0.008803 -0.004675 0.005454 -0.02427 0.014591 -0.005061 0.002702 -0.050868 0.007191 0.0094771 0.010446 -0.075623 0.020732 -0.061988 -0.023063 -0.110588 -0.021992 0.074301 0.025302 0.0520475 -0.010304 -0.047838 0.009502 -0.003433 0.025026 -0.055112 0.00784 -0.037945 0.005137 0.0341887 0.005671 0.062703 0.023108 -0.031421 -0.000193 0.0049349 0.005544 -0.03051 0.009161 0.0631902 0.009507 -0.036317 -0.023762 0.0038091 0.025101 -0.061763 -0.024355 -0.030548 0.009303 -0.004882 -0.014712 0.0131121 -0.015199 0.0868991 0.008547 -0.059052 0.026395 -0.021522 -0.009371 -0.001672 0.010479 0.0055521 0.00428 -0.015162 -0.020517 -0.06621 -0.007087 0.0370723 -0.020563 -0.018011 -0.03161 0.0228336 0.028106 -0.067521 -0.025707 -0.004513 -0.030359 0.05411 -0.020643 0.1093034 0.011957 -0.008429 0.030354 0.0510881 0.036224 -0.061383 0.008353 0.011846 0.01395 0.000227 -0.010744 -0.009712 -0.033298 0.003078 0.089695 0.0198466 -0.032563 0.0068921 -0.029449 -0.083566 -0.01915 0.018463 0.015689 0.018622 0.004926 -0.0075 0.001275 0.019178 FIN 5550-WB1: Jack De Jong: Quantitative Problem Set #2: Due: Monday, February 13, 2017 by 11:59 PM: Name: Problem: Points Questions Your Answers: Capital Allocation: (50 points) 1 (5) Exp. Ret. 2 (5) Std. Dev. 3 (5) Std. Dev. (5) High/Low (5) Why? 4 5 6 7 8 (5) (5) (5) (5) (5) Correlation Opt. Wt. Exp. Ret. Std. Dev. Sharpe FIN 5550-WB1: Jack De Jong: Quantitative Problem Set #2: Due: Monday, February 13, 2017 by 11:59 PM: Name: (Fill in your 9th ticker symbol in cells L41 and C52.) Markowitz Optimization: (50 points) SPY 1 (5) Avg. Ret. 2 (10) Cov.Matr: SPY MDY IWM QQQ EFA VWO VNQ BND 3 4 5 6 7 (3) (3) (3) (5) (4) How? Exp. Ret. Std. Dev. Weights Exp. Ret. Weights MDY IWM QQQ EFA VWO VNQ BND 8 9 10 11 12 13 14 (3) (3) (3) (2) (2) (2) (2) Exp. Ret. Std. Dev. Weights Exp. Ret. Std. Dev. Weights Sharpe