1. Using three mutual funds with different sector exposure, or you could use a broad- based stock mutual fund, a long-term corporate bond mutual fund and a money market mutual fund.Make atime series of monthly returns from this time series of monthly prices. Calculate the annualised mean return, standard deviation, and correlation of the funds.

Reference :three funds selected.

a)https://finance.yahoo.com/quote/DODGX/performance?p=DODGX

b)https://finance.yahoo.com/quote/PGOVX/risk?p=PGOVX

c)https://finance.yahoo.com/quote/FSHBX/performance?p=FSHBX

1. Calculate the weights on the minimum variance portfolio (MVP) consisting of the three mutual funds. You will need to use Excel here and the functions required will be discussed in the pre-recorded and live sessions.
2. Calculate the weights on another efficient portfolio whose expected return is set equal to the maximum of the three mutual fund expected returns.
3. Calculate the annualised expected return and standard deviation of the minimum variance portfolio and the second optimal portfolio from Section A: part 3.
4. Sweep out the efficient frontier weights by forming combination weights with alpha invested in the higher expected return optimal portfolio from part 3 and (1-alpha) invested in the MVP, where alpha is varied according to trial and error to result in approximately 10 efficient portfolios between the MVP and the second efficient portfolio which should result in a nice plot of the efficient frontier. Calculate the expected returns and standard deviations of these efficient portfolios.Plot the three funds, the minimum variance portfolio and the second efficient portfolio on a diagram along with the efficient frontier consisting ofefficient portfolios made up of these three assets. Clearly label the axes on the graph and include a graph caption.
5. Discuss diversification referring to the expected return and standard deviation of the minimum-variance portfolio.
6. Discuss the possible overestimation of the benefits of diversification since in the real world the parameters needed for portfolio optimization can only be estimated using historical data. Hence, these parameters are often estimated with a large amount of error. In this section, please refer to a small number of academic journal articles or papers in the literature on this issue.