The question is under the files, please use the excel functions to solve the problem.

Updated on Year 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 5Jan14 Annual Returns on Investments in S&P 500 3-month T.Bill 10-year T. Bond 43.81% 3.08% 0.84% -8.30% 3.16% 4.20% -25.12% 4.55% 4.54% -43.84% 2.31% -2.56% -8.64% 1.07% 8.79% 49.98% 0.96% 1.86% -1.19% 0.32% 7.96% 46.74% 0.18% 4.47% 31.94% 0.17% 5.02% -35.34% 0.30% 1.38% 29.28% 0.08% 4.21% -1.10% 0.04% 4.41% -10.67% 0.03% 5.40% -12.77% 0.08% -2.02% 19.17% 0.34% 2.29% 25.06% 0.38% 2.49% 19.03% 0.38% 2.58% 35.82% 0.38% 3.80% -8.43% 0.38% 3.13% 5.20% 0.57% 0.92% 5.70% 1.02% 1.95% 18.30% 1.10% 4.66% 30.81% 1.17% 0.43% 23.68% 1.48% -0.30% 18.15% 1.67% 2.27% -1.21% 1.89% 4.14% 52.56% 0.96% 3.29% 32.60% 1.66% -1.34% 7.44% 2.56% -2.26% -10.46% 3.23% 6.80% 43.72% 1.78% -2.10% 12.06% 3.26% -2.65% 0.34% 3.05% 11.64% 26.64% 2.27% 2.06% -8.81% 2.78% 5.69% 22.61% 3.11% 1.68% 16.42% 3.51% 3.73% 12.40% 3.90% 0.72% -9.97% 4.84% 2.91% 23.80% 4.33% -1.58% 10.81% 5.26% 3.27% -8.24% 6.56% -5.01% 3.56% 6.69% 16.75% 14.22% 4.54% 9.79% 18.76% 3.95% 2.82% -14.31% 6.73% 3.66% -25.90% 7.78% 1.99% 37.00% 5.99% 3.61% 23.83% 4.97% 15.98% -6.98% 5.13% 1.29% 6.51% 6.93% -0.78% 18.52% 9.94% 0.67% 31.74% 11.22% -2.99% -4.70% 14.30% 8.20% 20.42% 11.01% 32.81% 22.34% 8.45% 3.20% 6.15% 9.61% 13.73% 31.24% 7.49% 25.71% 18.49% 6.04% 24.28% 5.81% 5.72% -4.96% 16.54% 6.45% 8.22% 31.48% 8.11% 17.69% -3.06% 7.55% 6.24% 30.23% 5.61% 15.00% 7.49% 3.41% 9.36% 9.97% 2.98% 14.21% 1.33% 3.99% -8.04% 37.20% 5.52% 23.48% 22.68% 5.02% 1.43% 33.10% 5.05% 9.94% 28.34% 4.73% 14.92% 20.89% 4.51% -8.25% -9.03% 5.76% 16.66% S&P 500 20year average returns 3-month T.Bill 20year risk premiums Variance Standard deviation Correlation coefficient Covariance Minimum variance portfolio: Standard deviation Expected return w1 w2 Sharpe ratio Optimal portfolio: w1 w2 Expected return Standard deviation Sharpe ratio 10-year T. Bond Investment Opportunities Set sigma p w1 w2 1.00 0.00 0.01 0.99 0.02 0.98 0.03 0.97 0.04 0.96 0.05 0.95 0.06 0.94 0.07 0.93 0.08 0.92 0.09 0.91 0.10 0.90 0.11 0.89 0.12 0.88 0.13 0.87 0.14 0.86 0.15 0.85 0.16 0.84 0.17 0.83 0.18 0.82 0.19 0.81 0.20 0.80 0.21 0.79 0.22 0.78 0.23 0.77 0.24 0.76 0.25 0.75 0.26 0.74 0.27 0.73 0.28 0.72 0.29 0.71 0.30 0.70 0.31 0.69 0.32 0.68 0.33 0.67 0.34 0.66 0.35 0.65 0.36 0.64 0.37 0.63 0.38 0.62 0.39 0.61 0.40 0.60 0.41 0.59 0.42 0.58 0.43 0.57 0.44 0.56 0.45 0.55 0.46 0.54 0.47 0.53 0.48 0.52 0.49 0.51 0.50 0.50 0.51 0.49 0.52 0.48 0.53 0.47 0.54 0.46 0.55 0.45 0.56 0.44 0.57 0.43 0.58 0.42 0.59 0.41 0.60 0.40 0.61 0.39 0.62 0.38 0.63 0.37 0.64 0.36 0.65 0.35 0.66 0.34 0.67 0.33 0.68 0.32 0.69 0.31 0.70 0.30 0.71 0.29 0.72 0.28 0.73 0.27 E(Rp) 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 -11.85% -21.97% 28.36% 10.74% 4.83% 15.61% 5.48% -36.55% 25.94% 14.82% 2.10% 15.89% 32.15% 3.67% 1.66% 1.03% 1.23% 3.01% 4.68% 4.64% 1.59% 0.14% 0.13% 0.03% 0.05% 0.07% 5.57% 15.12% 0.38% 4.49% 2.87% 1.96% 10.21% 20.10% -11.12% 8.46% 16.04% 2.97% -9.10% 0.74 0.75 0.76 0.77 0.78 0.79 0.80 0.81 0.82 0.83 0.84 0.85 0.86 0.87 0.88 0.89 0.90 0.91 0.92 0.93 0.94 0.95 0.96 0.97 0.98 0.99 1.00 0.26 0.25 0.24 0.23 0.22 0.21 0.20 0.19 0.18 0.17 0.16 0.15 0.14 0.13 0.12 0.11 0.10 0.09 0.08 0.07 0.06 0.05 0.04 0.03 0.02 0.01 0.00 FIN360 -02 and 03 Fall 2015 EXTRA CREDIT ASSIGNMENT: OPTIMAL PORTFOLIO OF S&P500 AND TREASURIES Point Value: 10 points Objective: Analyze the risk-return tradeoff of a portfolio made-up by long-term stocks and 30-year treasuries. Instructions: Find the spreadsheet labeled \"Optimal Portfolio Weights - template\" in the Resources section of our class' Isidore page. 1. Build the investment opportunities set: Calculate the correlation coefficients of annual returns. Calculate the expected returns and standard deviations of the S&P500 and long-term treasuries with different weights. 2. Graph the investment opportunities set. 3. Find the weights of the minimum variance portfolio. 4. Graph the CALs of the minimum variance and optimal portfolios. Note that the risk-free rate is the average Treasury bill rate over the past 20 years. 5. Find the weights of the optimal portfolio