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Risk premium S&P 500 HP DELL WMT TARGET BP SHELL Risk premium 0.06 0.137089 0.063893 0.032191 0.083532 0.040018 0.042914 Covariance matrix S&P 500 HP DELL

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Risk premium
S&P 500 HP DELL WMT TARGET BP SHELL
Risk premium 0.06 0.137089 0.063893 0.032191 0.083532 0.040018 0.042914
Covariance matrix
S&P 500 HP DELL WMT TARGET BP SHELL
S&P 500 0.0184 0.0375 0.0227 0.0114 0.0234 0.0086 0.0124
HP 0.0375 0.1469 0.0462 0.0232 0.0475 0.0175 0.0253
DELL 0.0227 0.0462 0.0852 0.0141 0.0288 0.0106 0.0153
WMT 0.0114 0.0232 0.0141 0.0380 0.0145 0.0053 0.0077
TARGET 0.0234 0.0475 0.0288 0.0145 0.0688 0.0109 0.0157
BP 0.0086 0.0175 0.0106 0.0053 0.0109 0.0337 0.0058
SHELL 0.0124 0.0253 0.0153 0.0077 0.0157 0.0058 0.0400
1. Consider the asset allocation with S&P500 and six securities of US companies; Hewlett- Packard (HP), Dell, Walmart (WMT), Target, British Petroleum (BP) and Royal Dutch Shell (SHELL). Risk premium of each asset and the variance-covariance matrix for seven assets can be found in Probl sheet in ps3_data.xls. (a) Find the risk premium, SD, Sharpe ratio and weight on each asset for the global minimum variance portfolio. (b) Find the risk premium, SD, Sharpe ratio and weight on each asset for the tangent portfolio. (C) Draw a graph of the efficient frontier (find the minimum SD when the risk premium is 0.04, 0.045, 0.05, 0.06, 0.07 and connect them along with the minimum-variance portfolio and tangent portfolio). 1. Consider the asset allocation with S&P500 and six securities of US companies; Hewlett- Packard (HP), Dell, Walmart (WMT), Target, British Petroleum (BP) and Royal Dutch Shell (SHELL). Risk premium of each asset and the variance-covariance matrix for seven assets can be found in Probl sheet in ps3_data.xls. (a) Find the risk premium, SD, Sharpe ratio and weight on each asset for the global minimum variance portfolio. (b) Find the risk premium, SD, Sharpe ratio and weight on each asset for the tangent portfolio. (C) Draw a graph of the efficient frontier (find the minimum SD when the risk premium is 0.04, 0.045, 0.05, 0.06, 0.07 and connect them along with the minimum-variance portfolio and tangent portfolio)

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