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Construct the covariance matrix

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Reference no: EM133076131

Given the following information from the Partners Health case study, please perform the following tasks:

Annual Expected Returns, Standard Deviations

 

 

Asset Class

Expected Ret.

Stdev

 

 

US Equity

12.94%

15.21%

 

 

Foreign Equity

12.42%

14.44%

 

 

Bonds

5.40%

11.10%

 

 

REITs

9.44%

13.54%

 

 

Commodities

10.05%

18.43%

 

 

STP

3.20%

0%

 

 

Correlation Matrix

 

US Equity

Foreign Equity

Bonds

REITs

Commodities

US Equity

1.000

0.620

0.250

0.560

-0.020

Foreign Equity

0.620

1.000

0.060

0.400

0.010

Bonds

0.250

0.060

1.000

0.160

-0.070

REITs

0.560

0.400

0.160

1.000

-0.010

Commodities

-0.020

0.010

-0.070

-0.010

1.000
  1. construct the covariance matrix for all five assets being considered for the new allocation
  2. Calculate the information needed to plot the Capital Allocation Line
  3. Plot both efficient frontier and the CAL

Reference no: EM133076131

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