$2$ Use the information in the table to answer questions $($a$)-($e$).$

The correlation between stocks and bonds is $(S,B)=,0\mathrm{.}05$

Calculate the covariance of the returns for stock and bonds.

Calculate the variance of returns for a portfolio that is $60\%$ invested in stocks and $40\%$ invested in bonds.

You are trying to decide among three possible allocations: $100\%$ in Stock, $100\%$ in Bonds, or $60\%$ Stock$/40\%$ Bonds $($these are the only $3$ choices$)$

Your utility function depends on expected return and variance and your risk aversion coefficient is $A=3.$ Which of the three allocations is best for you?

Briefly explain your answer.

Note $1$: The tangency portfolio does not have any money invested in the risk$-$free asset$).$

Note $2$: The $\frac{60}{40}$ portfollio from part $($a$)$ is not the tangency portfolio

You wish to construct an efficient portfolio with an expected return equal to $4$ percent. What are the asset weights in the portfolio?

That is$,$ what are the weight of stocks, bonds and bills in the portfolio?

Tabulate and graph the investment opportunity set of the two risky funds.

Use investment proportions for the stock fund from $0\%$ to $100\%$ in increments of $10\%.$ Please show your work in the sheet labelled Graph.