SPY and XIU are ETFs tracking the S&P 500 and S&P/TSX 60 index, which are often used as proxies for the U.S. and Canadian stock markets, respectively. From a set of their historical data, the annual expected returns and standard deviations of those two ETFs and their covariance are estimated as follows:

SPY: E(r)=0.15 = 0.28

XIU: E(r)=0.18 =0.32

Covariance between SPY and XIU = 0.0618

Suppose that you have $10 million to invest for one year and you want to invest that money into SPY, XIU, and the Canadian one-year T-bill. Assume that the interest rate of the one-year T-Bill is 3% per annum.

Suppose that you have the following utility function:

U=E(r) - A²and A=3

Answer the following questions using Excel:

1.Draw the opportunity set offered by these two securities (with an increment of 0.01 in weight).