There are two stocks (indexed by 1 and 2), with expected returns and covariance matrix (for some specific investment horizon) given as follows: = (1954 10% 15% and = ( 225 x 10-4 100 x 10-4 - 100 x 10-4 100 x 10-4 The inverse of is: 80 80 -1 = (So 80 180 The risk-free asset over the same investment horizon has return: Mf = 5%. (i) Use Markowitz models to construct an optimal portfolio comprising of only the two stocks (i.e. the risk-free asset is not included in the portfolio) to achieve an expected portfolio return at 12%. Compute the standard deviation of the return of this portfolio. Describe how to allocate $1 million dollars according to the portfolio you obtained; to describe this, specify how many dollars to be spent in each asset. Is this portfolio efficient under the Markowitz model you use? 2 (ii) Now, include the risk-free asset in the portfolio, and repeat (i). There are two stocks (indexed by 1 and 2), with expected returns and covariance matrix (for some specific investment horizon) given as follows: = (1954 10% 15% and = ( 225 x 10-4 100 x 10-4 - 100 x 10-4 100 x 10-4 The inverse of is: 80 80 -1 = (So 80 180 The risk-free asset over the same investment horizon has return: Mf = 5%. (i) Use Markowitz models to construct an optimal portfolio comprising of only the two stocks (i.e. the risk-free asset is not included in the portfolio) to achieve an expected portfolio return at 12%. Compute the standard deviation of the return of this portfolio. Describe how to allocate $1 million dollars according to the portfolio you obtained; to describe this, specify how many dollars to be spent in each asset. Is this portfolio efficient under the Markowitz model you use? 2 (ii) Now, include the risk-free asset in the portfolio, and repeat (i)