Use the variance-covariance matrix, mean return vector, and sigma vector that you calculated Ford Motors, Goldman Sachs,
Question:
Use the variance-covariance matrix, mean return vector, and sigma vector that you calculated Ford Motors, Goldman Sachs, Starbucks, General Electric, and Macy's Inc., finish the following questions:
a. Annualize variance-covariance matrix, mean return vector, and sigma vector.
b.Assuming that the risk-free rate is 0%, calculate an envelope portfolio of these six firmswith no short sale restrictions (i.e. with short sales).
c.Assuming that the risk-free rate is 5%, calculate another envelope portfolio of these six firmswith no short sale restrictions (i.e. with short sales).
d.Use the two envelope portfolios that you created in a and b, and generate an envelope frontier of these six companieswith no short sale restrictions (i.e. with short sales). Plot the frontier.
e. Show and plot that six individual stocks all lie within the envelope frontier that you created in c.