Expected Monthly Return
	Expected Monthly Return
PG	0.010848
Microsoft	0.014854
BAC	0.011589
Exxon	0.012043
Variance
	Variance	Sigma
PG	0.004478	0.066918113
Microsoft	0.012820	0.113225298
BAC	0.005611	0.074907547
Exxon	0.002820	0.053101828
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

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

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).

(b) Find the optimal investment portfolio in the risky assets. What are the mean and s.d. of the returns of this portfolio?

(c) Find the global minimum variance portfolio. What is the expected return and variance of return of this portfolio?

(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).