Efficient Frontier

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QUESTION

Similar to what we performed in class, please use the data in the FIN 542 – MVO Data to answer the following.  Please attach your excel worksheet.
1) Calculate the Annualized Return and Annualized Volatility for each of these names (10 points):

2) Assuming the risk free rate, what is the Sharpe Ratio of BRK/A assuming a 0.50% risk free rate (4 point)?

3) Create a covariance matrix, the complete symmetrical one (remember alt, e, s, e?) using excel data analysis tools and paste here (do you remember what you need to add in excel?) (4 point):

Now comes the fun part.  Determine the GMV using the Solver function.  I would like to know the following:

4) In the solver, what is going to be our objective when trying to determine the most efficient portfolio (what is that target cell, and what are we doing with it) (2 point)?

5) Why do we have a constraint that has all the assets equaling one (2 point)?

6) The weights of all the components at the GMV (8 points)

7) The following data about the portfolio at the maximized Sharpe Ratio (1 point each):
Daily Volatility
Daily Return
Holding Period Conversion
Annualized Volatility
Annualized Return
Sharpe Ratio

8) Determine the annual volatility level for the following returns (30%, 40%, 50%) (9 points):
Annualized Return Annualized Volatility
30%
40%
50%

9) What is the highest Sharpe Ratio for the portfolio? (2 pt)

10) Include your excel workbook to produce these answers, with working formulas (zero for MVO problem if no excel provided).

11) What is dominance and how does it apply to the efficient frontier?  Please answer in 2-3 sentences (3 pts).

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