NAME: Instructions: You may work with other students on the homework, but you MUST turn in your own assignment. There is no partial credit given for any of the questions. However, in order to receive credit, you MUST show your work/how you obtained the answer. Just showing the answer (even if the answer is correct) will result in a zero for that question. All quizzes are due at the very beginning of class. Late assignments will not be graded. Use the following information to answer questions 1 through 10: You are trying to form portfolios based on the following information about Stocks A,B,C and D Expected Return of Stock A = 5%; Stock B = 8%; Stock C = 15%; Stock D = 21% The Standard Deviation of Stock A = 12%; Stock B = 18%; Stock C = 32%; Stock D = 40% The Correlation between A,B = -0.05; A,C = 0.10, A,D=0.07; B,C = 0.20; B,D = 0.50; C, D = 0.35 The Risk Free Rate is 4.0% Using Excel, do/answer the following: Question 1: Construct a correlation matrix of the four stocks Question 2: Construct a Covariance matrix of the four stocks. Question 3.4 and 5: Assume that you use a nave diversification approach and put 25% of your money equally into each stock. Compute the Expected Return, Standard Deviation and Sharpe Ratio of such a portfolio Question 6,7,8, and 9: Compute the Weights, Expected Return, Standard Deviation and Sharpe Ratio of the Market (Optimal) portfolio using the Excel solver function. Question 10: Assume an investor has a risk aversion factor of 3. If they had $100,000, how much should they put in the risky portfolio calculated above