Expected Monthly Return
		Expected Monthly Return
	PG	0.010848
	Microsoft	0.014854
	BAC	0.011589
	Exxon	0.012043
	Variance
		Variance
	PG	0.004478
	Microsoft	0.012820
	BAC	0.005611
	Exxon	0.002820
	Covariance
	Cov(PG, Microsoft)	-0.000649
	Cov(PG, BAC)	0.000683
	Cov(PG, Exxon)	0.000433
	Cov(Microsoft, BAC)	0.001681
	Cov(Microsoft, Exxon)	0.000804
	Cov(BAC, Exxon)	0.000757

2/3/97	0.039059	-0.04394	0.109771	-0.02517
3/3/97	-0.04485	-0.05994	-0.07011	0.074816
4/1/97	0.099732	0.325186	0.088252	0.051471
5/1/97	0.096787	0.02085	-0.0247	0.053613
6/2/97	0.024472	0.018853	0.102423	0.033628
7/1/97	0.080347	0.118736	0.102398	0.048801
8/1/97	-0.12496	-0.06478	-0.1604	-0.04122
9/2/97	0.037519	0.000737	0.041554	0.046828
10/1/97	-0.01181	-0.01767	-0.03368	-0.04067
11/3/97	0.120612	0.088456	0.00429	-0.00042
12/1/97	0.047318	-0.08678	0.018687	0.002969
1/2/98	-0.01495	0.1546	-0.0152	-0.03087
2/2/98	0.08301	0.135859	0.143693	0.082024
3/2/98	-0.00596	0.056354	0.070731	0.060887
4/1/98	-0.0228	0.007077	0.042156	0.080578
5/1/98	0.020264	-0.05892	-0.00667	-0.02955
6/1/98	0.085766	0.277427	0.020991	0.012323
7/1/98	-0.12555	0.014388	0.039885	-0.01575
8/3/98	-0.03613	-0.12722	-0.27916	-0.06293
9/1/98	-0.07037	0.147283	-0.06308	0.079193
10/1/98	0.251503	-0.03807	0.074941	0.014029
11/2/98	-0.01215	0.152324	0.133442	0.05321
12/1/98	0.042346	0.136981	-0.07112	-0.02492
1/4/99	-0.00165	0.261679	0.111743	-0.03938
2/1/99	-0.01512	-0.14226	-0.02327	-0.04711
3/1/99	0.094361	0.194093	0.088614	0.06
4/1/99	-0.03929	-0.09269	0.013567	0.177287
5/3/99	-0.00478	-0.00779	-0.09629	-0.03357
6/1/99	-0.0563	0.117754	0.141424	-0.03442
7/1/99	0.031383	-0.04862	-0.0946	0.029164
8/2/99	0.095943	0.078932	-0.0883	-0.00126
9/1/99	-0.05528	-0.02184	-0.07252	-0.03657
10/1/99	0.122319	0.02233	0.156916	-0.02552
11/1/99	0.029724	-0.01632	-0.09074	0.077569
12/1/99	0.014433	0.282236	-0.13617	0.015581
1/3/00	-0.07498	-0.16169	-0.0349	0.028843
2/1/00	-0.13062	-0.08686	-0.0505	-0.08619
3/1/00	-0.35411	0.18888	0.152988	0.035574
4/3/00	0.057826	-0.34365	-0.06549	-0.00378
5/1/00	0.113029	-0.10304	0.141377	0.07814
6/1/00	-0.1466	0.278816	-0.22424	-0.05781
7/3/00	0.010385	-0.12728	0.101858	0.021489
8/1/00	0.084797	0	0.141786	0.02378
9/1/00	0.083695	-0.13608	-0.02243	0.091423
10/2/00	0.071038	0.141761	-0.08226	0.000819
11/1/00	0.048299	-0.16696	-0.15732	-0.00845
12/1/00	0.047696	-0.24374	0.149059	-0.0121
1/2/01	-0.0799	0.407075	0.172544	-0.03201
2/1/01	-0.01851	-0.03352	-0.04726	-0.03191
3/1/01	-0.11214	-0.07308	0.079481	-0.00059
4/2/01	-0.03476	0.238753	0.022977	0.093908
5/1/01	0.069628	0.021215	0.067892	0.00652
6/1/01	-0.00673	0.055282	0.013384	-0.01538
7/2/01	0.119397	-0.09343	0.059906	-0.04386
8/1/01	0.044078	-0.13802	-0.03338	-0.03326
9/4/01	-0.01837	-0.1029	-0.0419	-0.01868
10/1/01	0.019041	0.136126	0.010091	0.001209
11/1/01	0.049936	0.104315	0.040438	-0.04648
12/3/01	0.021479	0.031866	0.035665	0.050965
1/2/02	0.037248	-0.0386	0.001325	-0.00633
2/1/02	0.037938	-0.08413	0.02425	0.063959
3/1/02	0.0625	0.03382	0.063711	0.061254
4/1/02	0.00604	-0.13368	0.065561	-0.08349
5/1/02	-0.00783	-0.02564	0.045955	-0.00029
6/3/02	0.004999	0.074163	-0.06427	0.024612
7/1/02	0.001571	-0.12249	-0.0551	-0.10152
8/1/02	-0.00392	0.022843	0.053799	-0.0296
9/3/02	0.008397	-0.10868	-0.08106	-0.10003
10/1/02	-0.00598	0.22216	0.093723	0.055029
11/1/02	-0.04424	0.078815	0.004265	0.04076
12/2/02	0.016708	-0.10389	0.001931	0.003983
1/2/03	0.000269	-0.082	0.006936	-0.02248
2/3/03	-0.04336	0.002053	-0.01186	0.003044
3/3/03	0.087838	0.021516	-0.02517	0.02731
4/1/03	0.013716	0.056169	0.107668	0.00722
5/1/03	0.021956	-0.03751	0.002152	0.041382
6/2/03	-0.02873	0.041934	0.074087	-0.01345
7/1/03	-0.00977	0.02983	0.044652	-0.0092
8/1/03	-0.00649	0.004138	-0.04019	0.066901
9/2/03	0.063268	0.048535	-0.00532	-0.0294
10/1/03	0.064175	-0.05459	-0.0294	-0.00031
11/3/03	-0.02103	-0.01663	-0.00413	-0.0034
12/1/03	0.037999	0.064819	0.077774	0.132485
1/2/04	0.016598	0.010146	0.012829	-0.00521
2/2/04	0.014091	-0.04061	0.005383	0.040209
3/1/04	0.023158	-0.06008	-0.00157	-0.01377
4/1/04	0.013581	0.047942	-0.00599	0.023087
5/3/04	0.019141	0.004159	0.032688	0.023091
6/1/04	0.009808	0.088357	0.027658	0.02693
7/1/04	-0.03761	-0.00211	0.004785	0.042458
8/2/04	0.073223	-0.03898	0.058333	0.001677
9/1/04	-0.03301	0.012787	-0.027	0.048314
10/1/04	-0.04987	0.011319	0.033526	0.01848
11/1/04	0.044861	0.068446	0.032998	0.046819
12/1/04	0.030013	-0.00322	0.025717	0.000214
1/3/05	-0.02934	-0.01657	-0.0132	0.006632
2/1/05	-0.0025	-0.03946	0.005884	0.232944
3/1/05	-0.00167	-0.03937	-0.04547	-0.05861
4/1/05	0.026795	0.046771	0.021448	-0.04303
5/2/05	0.018552	0.022979	0.028361	-0.00957
6/1/05	-0.04343	-0.03744	-0.00583	0.022604
7/1/05	0.059845	0.031115	-0.04401	0.022294
8/1/05	-0.00257	0.072087	-0.0014	0.02458
9/1/05	0.071655	-0.0602	-0.02179	0.060606
10/3/05	-0.05356	-0.00125	0.039132	-0.11633
11/1/05	0.021468	0.080383	0.060473	0.038876
12/1/05	0.012037	-0.05513	0.005702	-0.03205
1/3/06	0.028318	0.076295	-0.04175	0.117129
2/1/06	0.01175	-0.04208	0.036848	-0.04883
3/1/06	-0.03847	0.012663	0.00415	0.025036
4/3/06	0.015852	-0.11254	0.096099	0.036549
5/1/06	-0.06818	-0.05856	-0.0205	-0.0295
6/1/06	0.02492	0.028531	-0.00602	0.007162
7/3/06	0.016534	0.032742	0.071169	0.104232
8/1/06	0.101416	0.072215	0.009718	0.003455
9/1/06	0.001216	0.064066	0.040734	-0.0083
10/2/06	0.027937	0.049788	0.005591	0.064394
11/1/06	-0.00945	0.026103	0.010051	0.080071
12/1/06	0.023517	0.017198	-0.00847	-0.00233
1/3/07	0.0333	0.041916	0.003844	-0.04046

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).

(d) What would be the capital allocation between the risk free asset and the optimal risky investment portfolio for an individual with risk aversion coefficient of 3? If the initial investment is $100,000, how much money should the investor allocate to each of the 5 assets (risk free asset and 4 risky assets).