Portfolio Analysis Problem (Excel Spreadsheet)

Solve the following portfolio analysis problem using excel. Be sure to create a general spreadsheet as you will be graded by the accuracy of your spreadsheet for the 8 computations below with a change in some or all of the following: Portfolio Weights, Probabilities, Asset Returns. Be sure to put your name at the top of the spreadsheet and submit as an excel attachment in Canvas (please save as an .xls file instead of an .xlsx file). Work out the problem manually before you create your spreadsheet. Check figures have been provided below. Along with the table below, remember to put your portfolio weights (for numbers 5 and 6) at the top of your spreadsheet and cell reference them in your formulas.

State

Probability

% Return A

% Return M

Good

.3

20

16

Normal

.4

18

10

Bad

.3

10

14

Compute:

1) Expected return for A and M A = 16.2 M = 13

2) Standard deviation for A and M (population) A = 4.1425 M = 2.5690

3) Covariance(A,M) COV = -.6

4) Correlation(A,M) CORR = -.0564

5) Expected return on a portfolio consisting of 30% A and 70% M. P = 13.96

6) Standard deviation of a portfolio consisting of 30% A and 70% M. P = 2.1275

7) The Beta of A. (assume that M is the market) BETA = -.0909

8) The portfolio weights for the minimum risk portfolio. W(A) = .2885 W(M) = .7115