The following are monthly percentage price changes for four market indexes.

Month DJIA S&P 500 Russell 2000 Nikkei

1 0.03 0.02 0.04 0.04

2 0.07 0.06 0.10 0.02

3 0.02 0.01 0.04 0.07

4 0.01 0.03 0.03 0.02

5 0.05 0.04 0.11 0.02

6 0.06 0.04 0.08 0.06

Compute the following.

a. Average monthly rate of return for each index

b. Standard deviation for each index

c. Covariance between the rates of return for the following indexes:

DJIAS&P 500

S&P 500Russell 2000

S&P 500Nikkei

Russell 2000Nikkei

d. The correlation coefficients for the same four combinations

e. Using the answers from parts (a), (b), and (d), calculate the expected return and standarddeviation of a portfolio consisting of equal parts of (1) the S&P and the Russell 2000 and (2) the S&P and the Nikkei. Discuss the two portfolios.