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Question 3 Consider historical data showing that the average annual rate of return on the S&P 500 portfolio over the past 80 years has averaged
Question 3 Consider historical data showing that the average annual rate of return on the S&P 500 portfolio over the past 80 years has averaged roughly 8% more than the Treasury Bill return, and that the S&P500 standard deviation has been about 20% per year. Assume these values are representative of investor expectations for future performance and that the current T-bill rate is 5%. Calculate the expected return and variance of portfolios invested in T-bills and the S&P500 index with weights as follows: Wbills 0 0.2 Windex 1.0 0.8 0.6 0.4 0.2 0.4 0.6 0.8 1.0 0
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