Date	PG	Microsoft	BAC	Exxon			Expected Monthly Return
2/3/1997	0.0390590324	-0.04393505253	0.1097708082	-0.02516692347				Expected Monthly Return
3/3/1997	-0.04485262708	-0.05994005994	-0.07010869565	0.07481559536			PG	0.010848
4/1/1997	0.09973166369	0.3251859724	0.08825248393	0.05147058824			Microsoft	0.014854
5/1/1997	0.09678731192	0.0208500401	-0.02470461869	0.05361305361			BAC	0.011589
6/2/1997	0.02447163515	0.01885310291	0.1024229075	0.03362831858			Exxon	0.012043
7/1/1997	0.08034744843	0.1187355436	0.1023976024	0.04880136986
8/1/1997	-0.124958124	-0.06478290834	-0.1603987313	-0.0412244898			Variance
9/2/1997	0.03751914242	0.0007369196758	0.04155423637	0.04682843763				Variance
10/1/1997	-0.01180811808	-0.0176730486	-0.03367875648	-0.04066693778			PG	0.004478
11/3/1997	0.1206123973	0.08845577211	0.004289544236	-0.0004239084358			Microsoft	0.012820
12/1/1997	0.04731756081	-0.0867768595	0.01868659904	0.002968617472			BAC	0.005611
1/2/1998	-0.01495386573	0.1546003017	-0.01519916143	-0.03086680761			Exxon	0.002820
2/2/1998	0.08301033592	0.1358589157	0.143693454	0.08202443281
3/2/1998	-0.005964807635	0.05635422657	0.07073057236	0.06088709677			Covariance
4/1/1998	-0.02280228023	0.00707675558	0.04215558453	0.0805777271			Cov(PG, Microsoft)	-0.000649
5/1/1998	0.02026404667	-0.05891891892	-0.006672226856	-0.02954625396			Cov(PG, BAC)	0.000683
6/1/1998	0.08576587421	0.2774267662	0.02099076406	0.01232330555			Cov(PG, Exxon)	0.000433
7/1/1998	-0.1255543237	0.01438848921	0.03988486842	-0.01575366989			Cov(Microsoft, BAC)	0.001681
8/3/1998	-0.03613312203	-0.1272163121	-0.279161724	-0.06293197526			Cov(Microsoft, Exxon)	0.000804
9/1/1998	-0.07037158829	0.1472828847	-0.0630828305	0.07919254658			Cov(BAC, Exxon)	0.000757
10/1/1998	0.2515033605	-0.03806994245	0.07494145199	0.01402877698
11/2/1998	-0.01215375919	0.1523239761	0.1334422658	0.05321035828
12/1/1998	0.04234620887	0.1369808307	-0.07111965401	-0.02492421691
1/4/1999	-0.001646994236	0.2616789603	0.111743404	-0.03937823834
2/1/1999	-0.01512235359	-0.1422605791	-0.02326663564	-0.04710535778
3/1/1999	0.09436069235	0.194092827	0.08861362554	0.06
4/1/1999	-0.03928571429	-0.0926882305	0.01356673961	0.1772872909
5/3/1999	-0.00477960701	-0.007789095267	-0.09628670121	-0.0335651648
6/1/1999	-0.05629669157	0.1177536232	0.1414237936	-0.03441802253

For this assignment, please use excel file group_assignment_1_portfolios.xls posted on blackboard under the folder of Excel Files. The file contains the monthly returns of 4 stocks over the 10 year period -- January 1997 -- December 2006. In this file, the expected monthly return for each stock is calculated using excel function AVERAGE (), for each stock, the variance of monthly returns is calculated using Excel function VAR (), and the covariance between the returns of each pair of stocks is calculated using Excel function COVAR ().

Assume that the yearly risk free rate is 2% (A monthly risk free rate of 0.001652).

(a) Plot the minimum variance frontier for an investor who wants to allocate his money to PG, BAC, and the risk-free asset. Find the optimal risky portfolio. What are the mean and s.d. of the returns of this portfolio?

For questions (b), (c), and (d), we assume that investors invest in the risk-free asset and 4 risky assets (PG, Microsoft, BAC, and Exxon).