(Minimum variance portfolio and efficient portfolio to match target return)

During the decade 2005–2014, Ford and Microsoft (MSFT) were negatively correlated (see data below). Find the following two portfolios:

a. The minimum variance portfolio.

b. The efficient portfolio having an expected return of 4%.

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A 1 B FORD AND MSFT FORD D MSFT 234567 Date return return 31-Dec-05 31-Dec-06 31-Dec-07 112.92% -0.93% -52.92% 15.82% -43.44% 20.85% 31-Dec-08 -5.91% -44.37% 31-Dec-09 -5.83% 60.40% 8 31-Dec-10 53.33% -6.52% 9 31-Dec-11 -48.14% -4.52% 10 31-Dec-12 -11.38% 5.83% 11 31-Dec-13 4.73% 44.29% 12 31-Dec-14 -32.90% 27.54% 13 14 Average, E(FORD) and E(MSFT) 15 Variance, Var(FORD) and Var(MSFT) 16 Standard deviation, OFORD and OMSFT 17 Covariance of returns, Cov(FFORD MSFT) 18 Correlation of returns, (PFORD, MSFT) -0.0276