The multi-factor model considers five factors, namely F1, F2, F3, F4, and F5.

In addition, each portfolio has 100 stocks with no stock overlap across the portfolios.

The following information on stocks returns applies (note: the econometric results below stem from datasets of end-of-day returns covering the 2015-2019 period (i.e., five years))

A B D E G H 19 Question 1 (100 points) 20 Loyola and Sir George Williams Financial Inc. (LSGWFI) is currently examining a pontential opportunity: a team of financial analysts is currently studying five different portfolios (i.e., G, R, 1 E, A, and T) in order to make a final decision on a financial investment. In particular, they intend to use a multifactor model that considers five factors, namely F1, F2, F3, F4, and F5. In addition, each portfolio has 100 stocks with no stock overlap across the portfolios. The following information on stocks returns applies (note: the econometric results below stem from 3 datasets of end-of-day returns covering the 2015-2019 period (i.e., five years)). 5 Risk-Free Rate 0.50% Factor Information 7 Expected Return(F1) 3.10% Standard Deviation(F1) 0.40% Expected Return(F2) 0.60% Standard Deviation(F2) 0.05% 9 Expected Return(F3) 2.90% Standard Deviation(F3) 0.95% 30 Expected Return(F4) 4.60% Standard Deviation(F4) 0.70% 1 Expected Return(F5) 1.65% Standard Deviation(F5) 0.80% 3 Shortlisted Portfolios Portfolio G Portfolio R Portfolio E Portfolio A Portfolio T 34 Alpha 0.052 0.014 0.021 0.032 0 5 Beta(F1) 1.095 0.032 2.349 0.717 1.953 6 Beta(F2) 5.783 2.675 1.473 3.143 4.365 7 Beta(F3) 2.356 3.914 0.918 0.258 0.354 8 Beta(F4) 4.115 2.115 6.382 4.663 3.967 Beta(F5) 3.458 1.564 2.438 0.374 2.958 10 Residuals(SD) 0.078 0.135 0.065 0.015 0.245 13 1b. In light of the information above, compute the expected values and standard deviations of portfolios G, R, E, A, and T. 10 16 1c. In light of the information above, compute all relevant covariances. Sheet1 +