TRANSPOSE OF MATRIX A

5 8 5 7
A= A'=
7 3 8 3

MULTIPLICATION OF A AND B
9 5 181 57
B= AB=
17 4 114 47

INVERSE OF C
8 5 11 -0.0024096386
C= 6 2 1 C^(-1)= -0.0506024096
9 11 5 0.1156626506

3 6 MULTIPLICATION OF D' AN
D= 4 E= 7 86
5 8
 INVERSE OF C
0.2313253012 -0.0409638554
-0.1421686747 0.13975903614
-0.1036144578 -0.0337349398

MULTIPLICATION OF D' AND E

 10Y GOVERNMENT CORPORATE
1-MONTH T-BILL VW CRSP EQUITY INDEX
BONDS BONDS
Jan-94 0.25% 3.07% 1.74% 2.42%
Feb-94 0.21% -2.38% -3.13% -3.06%
Mar-94 0.25% -4.61% -3.85% -4.12%
Apr-94 0.27% 0.95% -0.98% -1.19%
May-94 0.32% 0.89% -0.14% -1.03%
Jun-94 0.31% -2.76% -0.59% -0.61%
Jul-94 0.28% 3.05% 1.94% 3.39%
Aug-94 0.37% 4.29% 0.30% -0.35%
Sep-94 0.37% -1.96% -2.33% -2.80%
Oct-94 0.38% 1.71% -0.39% -0.36%
Nov-94 0.37% -3.74% -0.13% 0.39%
Dec-94 0.44% 1.29% 1.12% 1.40%
Jan-95 0.42% 2.20% 2.29% 2.44%
Feb-95 0.40% 3.95% 3.00% 3.18%
Mar-95 0.41% 2.61% 0.72% 1.08%
Apr-95 0.45% 2.52% 1.70% 1.91%
May-95 0.54% 3.38% 5.49% 6.04%
Jun-95 0.47% 3.14% 1.13% 1.05%
Jul-95 0.45% 4.09% -0.86% -0.98%
Aug-95 0.46% 1.01% 1.41% 2.22%
Sep-95 0.43% 3.71% 1.30% 1.61%
Oct-95 0.47% -1.06% 1.61% 1.50%
Nov-95 0.41% 4.28% 2.20% 2.30%
Dec-95 0.49% 1.51% 1.79% 2.27%
Jan-96 0.43% 2.65% 0.64% 0.16%
Feb-96 0.39% 1.71% -2.90% -3.76%
Mar-96 0.39% 1.11% -1.02% -1.08%
Apr-96 0.46% 2.49% -1.71% -1.28%
May-96 0.40% 2.74% -0.59% -0.20%
Jun-96 0.40% -0.74% 1.45% 1.88%
Jul-96 0.45% -5.68% 0.05% 0.09%
Aug-96 0.41% 3.12% -0.51% -0.79%
Sep-96 0.44% 5.32% 2.28% 2.77%
Oct-96 0.42% 1.27% 2.97% 3.62%
Nov-96 0.39% 6.45% 2.65% 2.87%
Dec-96 0.44% -1.25% -2.12% -2.10%
Jan-97 0.40% 5.30% -0.01% -0.32%
Feb-97 0.38% -0.10% -0.21% 0.66%
Mar-97 0.43% -4.71% -1.92% -2.39%
Apr-97 0.43% 4.37% 1.90% 1.82%
May-97 0.43% 6.98% 1.12% 1.34%
Jun-97 0.37% 4.37% 1.75% 1.95%
Jul-97 0.43% 7.47% 4.03% 5.26%
Aug-97 0.41% -3.81% -2.03% -2.50%
Sep-97 0.46% 5.63% 2.24% 2.32%
Oct-97 0.39% -3.44% 2.48% 1.83%
Nov-97 0.38% 3.31% 0.12% 1.13%
Dec-97 0.46% 1.78% 1.48% 1.55%
Jan-98 0.42% 0.58% 2.11% 0.95%
Feb-98 0.38% 7.16% -0.77% -0.09%
Mar-98 0.45% 5.02% 0.25% 0.40%
Apr-98 0.43% 1.15% 0.33% 0.72%
May-98 0.38% -2.71% 1.01% 1.71%
Jun-98 0.40% 3.53% 1.35% 1.04%
Jul-98 0.39% -2.08% 0.04% -0.66%
Aug-98 0.40% -17.02% 3.69% 0.09%
Sep-98 0.39% 6.40% 5.27% 3.57%
Oct-98 0.34% 7.19% -1.03% -2.74%
Nov-98 0.32% 6.21% -0.66% 3.60%
Dec-98 0.38% 6.34% 0.97% 0.06%
Jan-99 0.35% 3.78% 0.33% 1.30%
Feb-99 0.34% -3.80% -4.40% -3.59%
Mar-99 0.41% 3.81% 0.86% 0.30%
Apr-99 0.38% 4.59% -0.35% 0.12%
May-99 0.35% -2.14% -2.25% -1.78%
Jun-99 0.41% 5.04% -0.72% -1.33%
Jul-99 0.37% -3.14% -0.42% -0.99%
Aug-99 0.39% -0.99% -0.45% -0.58%
Sep-99 0.37% -2.45% 1.20% 1.05%
Oct-99 0.36% 6.32% -0.61% 0.62%
Nov-99 0.38% 3.66% -0.66% -0.17%
Dec-99 0.38% 7.84% -1.24% -0.92%
Jan-00 0.43% -4.43% -0.98% -0.19%
Feb-00 0.43% 2.84% 1.36% 1.17%
Mar-00 0.44% 5.52% 3.48% 0.86%
Apr-00 0.46% -6.12% -1.00% -1.58%
May-00 0.48% -4.00% 0.18% -1.14%
Jun-00 0.37% 4.92% 2.21% 3.48%
Jul-00 0.48% -2.05% 0.46% 1.90%
Aug-00 0.50% 7.26% 1.66% 1.25%
Sep-00 0.51% -5.07% -0.13% -0.55%
Oct-00 0.52% -2.22% 0.86% 0.00%
Nov-00 0.50% -10.77% 2.56% 1.38%
Dec-00 0.49% 1.68% 3.07% 1.70%
Jan-01 0.52% 3.60% 0.42% 4.47%
Feb-01 0.37% -10.17% 1.16% 0.51%
Mar-01 0.43% -7.09% 0.28% 0.05%
Apr-01 0.39% 8.00% -2.74% -0.72%
May-01 0.32% 1.03% 0.14% 1.35%
Jun-01 0.28% -1.67% 0.22% 0.70%
Jul-01 0.30% -1.85% 3.05% 3.49%
Aug-01 0.30% -6.35% 1.51% 1.81%
Sep-01 0.27% -9.40% 2.26% -2.69%
Oct-01 0.22% 2.64% 3.18% 4.52%
Nov-01 0.17% 7.43% -3.52% -1.08%
Dec-01 0.15% 1.74% -1.74% -0.86%
 Jan-02 0.14% -1.31% 0.46% 1.50%
Feb-02 0.13% -2.18% 1.20% 0.61%
Mar-02 0.13% 4.28% -3.68% -2.84%
Apr-02 0.15% -5.18% 2.94% 1.15%
May-02 0.14% -1.25% 0.81% 1.26%
Jun-02 0.13% -7.34% 2.16% -0.80%
Jul-02 0.15% -8.37% 3.08% -1.70%
Aug-02 0.14% 0.64% 3.02% 4.74%
Sep-02 0.14% -10.77% 4.69% 1.90%
Oct-02 0.13% 7.68% -2.02% -2.55%
Nov-02 0.12% 5.90% -2.12% 3.16%
Dec-02 0.11% -5.82% 3.60% 4.09%
Jan-03 0.09% -2.50% -0.83% 0.63%
Feb-03 0.09% -1.81% 2.62% 2.70%
Mar-03 0.10% 1.18% -0.57% -0.44%
Apr-03 0.09% 7.99% -0.01% 3.53%
May-03 0.09% 5.96% 4.25% 5.00%
Jun-03 0.10% 1.51% -0.91% -1.19%
Jul-03 0.07% 2.39% -6.68% -8.39%
Aug-03 0.07% 2.38% 0.47% 2.42%
Sep-03 0.09% -1.17% 4.68% 5.08%
Oct-03 0.07% 5.97% -2.44% -1.60%
Nov-03 0.07% 1.41% 0.17% 1.04%
Dec-03 0.08% 4.28% 1.03% 1.50%
Jan-04 0.07% 2.20% 1.30% 1.68%
Feb-04 0.06% 1.45% 1.75% 1.64%
Mar-04 0.08% -1.24% 1.44% 1.10%
Apr-04 0.08% -1.77% -4.91% -5.07%
May-04 0.06% 1.22% -0.67% -0.91%
Jun-04 0.08% 1.92% 1.01% 0.59%
Jul-04 0.09% -4.04% 1.21% 1.90%
Aug-04 0.11% 0.19% 3.22% 3.66%
Sep-04 0.12% 1.70% 0.28% 1.26%
Oct-04 0.11% 1.53% 1.11% 1.62%
Nov-04 0.15% 4.58% -1.77% -1.38%
Dec-04 0.17% 3.53% 1.34% 2.73%
Jan-05 0.17% -2.63% 0.94% 2.37%
Feb-05 0.16% 2.03% -1.31% -0.75%
Mar-05 0.21% -1.78% -0.45% -2.41%
Apr-05 0.21% -2.43% 2.61% 2.00%
May-05 0.24% 3.82% 1.84% 2.34%
Jun-05 0.23% 0.80% 0.90% 1.49%
Jul-05 0.24% 4.08% -2.13% -1.66%
Aug-05 0.29% -0.92% 2.08% 2.29%
Sep-05 0.28% 0.78% -1.83% -3.49%
Oct-05 0.27% -1.77% -1.19% -2.34%
Nov-05 0.30% 3.85% 0.63% 0.97%
Dec-05 0.32% 0.07% 1.12% 2.06%
Jan-06 0.35% 3.33% -0.46% -0.74%
Feb-06 0.33% 0.04% 0.02% 1.31%
Mar-06 0.36% 1.81% -1.98% -3.80%
Apr-06 0.36% 1.08% -0.88% -1.45%
May-06 0.42% -3.19% -0.10% -0.60%
Jun-06 0.40% 0.05% 0.31% 0.25%
Jul-06 0.40% -0.38% 1.64% 2.09%
Aug-06 0.43% 2.42% 2.16% 2.94%
Sep-06 0.40% 2.23% 1.13% 1.85%
Oct-06 0.41% 3.58% 0.71% 1.35%
Nov-06 0.42% 2.11% 1.37% 2.43%
Dec-06 0.40% 1.26% -1.57% -2.21%
Jan-07 0.43% 1.82% -0.36% -0.24%
Feb-07 0.38% -1.59% 2.00% 3.23%
Mar-07 0.43% 1.10% -0.22% -2.12%
Apr-07 0.43% 3.85% 0.68% 1.25%
May-07 0.40% 3.59% -1.45% -1.66%
Jun-07 0.39% -1.57% -0.68% -1.33%
Jul-07 0.40% -3.39% 2.39% -0.19%
Aug-07 0.42% 1.33% 1.71% 1.04%
Sep-07 0.33% 3.48% -0.04% 1.04%
Oct-07 0.32% 2.10% 1.31% 1.87%
Nov-07 0.34% -4.59% 4.42% -0.12%
Dec-07 0.29% -0.60% -0.36% 0.21%
Jan-08 0.24% -6.35% 3.84% -0.67%
Feb-08 0.13% -3.00% 0.93% -0.86%
Mar-08 0.19% -0.76% 1.13% -1.20%
Apr-08 0.10% 4.67% -1.64% 2.07%
May-08 0.09% 2.02% -1.88% -1.82%
Jun-08 0.18% -8.63% 1.08% -0.57%
Jul-08 0.14% -0.62% 0.52% -1.59%
Aug-08 0.13% 1.65% 1.53% 1.17%
Sep-08 0.15% -9.53% 0.09% -10.18%
Oct-08 0.08% -18.81% -2.86% -11.89%
Nov-08 0.02% -8.15% 8.54% 7.01%
Dec-08 0.00% 1.73% 5.69% 13.21%
Jan-09 0.00% -8.47% -4.45% -3.18%
Feb-09 0.01% -10.64% -0.19% -3.06%
Mar-09 0.02% 8.59% 3.29% -1.29%
Apr-09 0.01% 9.71% -3.58% 3.68%
May-09 0.00% 5.08% -1.64% 5.04%
Jun-09 0.01% 0.44% 0.29% 5.04%
Jul-09 0.01% 7.45% 0.83% 6.88%
Aug-09 0.01% 3.29% 1.01% 2.22%
Sep-09 0.01% 4.01% 1.03% 2.72%
Oct-09 0.00% -2.62% -0.36% -0.02%
Nov-09 0.00% 5.41% 1.90% 1.03%
Dec-09 0.01% 2.72% -3.79% -1.29%
Jan-10 0.00% -3.42% 2.08% 1.54%
Feb-10 0.00% 3.34% 0.20% 0.18%
Mar-10 0.01% 6.13% -1.40% 0.01%
Apr-10 0.01% 1.99% 1.65% 3.22%
May-10 0.01% -8.21% 2.53% -1.20%
Jun-10 0.01% -5.71% 3.39% 3.93%
Jul-10 0.01% 6.71% 0.79% 2.26%
Aug-10 0.01% -4.88% 3.55% 3.81%
Sep-10 0.01% 9.12% -0.20% -0.08%
Oct-10 0.01% 3.82% -0.52% -1.55%
Nov-10 0.01% 0.61% -0.72% -0.94%
Dec-10 0.01% 6.61% -3.89% -0.58%
Jan-11 0.01% 1.98% -0.02% -1.12%
Feb-11 0.01% 3.44% -0.02% 1.74%
Mar-11 0.01% 0.46% -0.05% -0.38%
Apr-11 0.01% 2.86% 1.45% 2.39%
May-11 0.00% -1.28% 2.49% 2.38%
Jun-11 0.00% -1.77% -0.59% -2.15%
Jul-11 0.00% -2.39% 3.11% 4.51%
Aug-11 0.01% -6.17% 4.75% 0.81%
Sep-11 0.00% -7.89% 2.95% 3.25%
Oct-11 0.00% 10.75% -1.21% 2.78%
Nov-11 0.00% -0.28% 0.87% -3.55%
Dec-11 0.00% 0.74% 1.90% 4.09%
Jan-12 0.00% 4.93% 0.88% 2.22%
Feb-12 0.00% 4.33% -1.06% 1.01%
Mar-12 0.00% 3.06% -1.95% -2.95%
Apr-12 0.00% -0.85% 2.84% 2.41%
May-12 0.01% -6.38% 3.14% 2.41%
Jun-12 0.00% 3.82% -0.66% 0.17%
Jul-12 0.00% 0.79% 1.58% 5.46%
Aug-12 0.01% 2.53% -0.24% -0.48%
Sep-12 0.01% 2.70% -0.64% 0.41%
Oct-12 0.00% -1.77% -0.29% 2.41%
Nov-12 0.01% 0.79% 0.94% -0.94%
Dec-12 0.01% 1.18% -0.88% -0.43%
Jan-13 0.00% 5.42% -1.49% -2.32%
Feb-13 0.01% 1.28% 1.16% 0.95%
Mar-13 0.00% 3.95% 0.38% -0.50%
Apr-13 0.00% 1.55% 1.76% 3.93%
May-13 0.00% 2.76% -3.12% -4.96%
Jun-13 0.00% -1.21% -2.99% -4.88%
Jul-13 0.00% 5.50% -0.45% 1.11%
Aug-13 0.00% -2.75% -1.29% -1.06%
Sep-13 0.00% 3.70% 1.79% -0.01%
Oct-13 0.00% 4.10% 0.69% 2.43%
Nov-13 0.00% 3.07% -1.22% -0.99%
Dec-13 0.00% 2.77% -2.18% 0.43%
Jan-14 0.00% -3.38% 3.57% 3.37%
Feb-14 0.00% 4.55% 0.44% 1.98%
Mar-14 0.00% 0.43% -0.39% 0.64%
Apr-14 0.00% -0.19% 0.84% 2.21%
May-14 0.00% 2.04% 1.91% 2.21%
Jun-14 0.00% 2.58% -0.24% 0.23%
Jul-14 0.00% -2.06% -0.02% 0.18%
Aug-14 0.00% 4.14% 1.88% 2.85%
Sep-14 0.00% -1.99% -1.06% -2.95%
Oct-14 0.00% 2.49% 1.31% 1.81%
Nov-14 0.00% 2.52% 1.42% 1.01%
Dec-14 0.00% -0.06% 0.14% 1.08%
FTSE NAREIT
2.95%
3.38%
-4.11%
1.61%
2.01%
-2.19%
-0.25%
0.55%
-2.05%
-3.78%
-3.30%
5.99%
-1.50%
3.19%
-0.60%
0.23%
4.40%
1.76%
1.55%
1.48%
1.81%
-1.86%
1.00%
5.34%
1.90%
0.77%
-0.14%
0.32%
2.68%
1.37%
0.86%
3.99%
1.72%
3.16%
4.45%
9.50%
1.11%
0.09%
-0.93%
-2.31%
3.15%
4.69%
2.95%
-0.20%
7.68%
-2.58%
1.68%
 1.95%
-0.47%
-1.71%
1.64%
-3.27%
-0.85%
-0.63%
-6.78%
-10.92%
6.15%
-2.76%
1.80%
-3.06%
-2.01%
-2.72%
-0.50%
9.27%
2.18%
-1.39%
-3.74%
-2.21%
-3.79%
-2.61%
-2.12%
2.96%
0.34%
-1.31%
3.19%
6.38%
1.04%
2.62%
8.16%
-4.05%
3.17%
-4.38%
1.18%
6.69%
1.45%
-1.30%
0.91%
2.60%
2.50%
5.68%
-1.74%
3.33%
-4.09%
-2.73%
5.21%
2.61%
 0.38%
1.79%
5.81%
1.30%
1.43%
2.70%
-5.18%
-0.02%
-4.03%
-4.68%
4.43%
1.14%
-2.83%
1.61%
2.05%
4.66%
5.94%
2.57%
5.10%
0.43%
3.10%
2.13%
4.42%
3.37%
4.21%
2.17%
5.45%
-16.56%
6.82%
2.95%
0.04%
7.59%
0.19%
4.45%
4.53%
4.71%
-8.24%
2.23%
-1.88%
4.57%
3.51%
4.59%
6.36%
-4.34%
-0.10%
-2.77%
4.25%
-0.22%
6.76%
 1.43%
4.88%
-3.18%
-2.74%
4.87%
2.99%
3.30%
1.97%
6.00%
4.27%
-1.29%
7.58%
-2.93%
-2.55%
0.15%
0.13%
-9.47%
-9.20%
5.30%
4.20%
0.81%
-9.07%
-4.60%
-0.43%
-3.91%
3.76%
6.00%
0.85%
-11.99%
2.80%
1.86%
-0.51%
-36.44%
-24.36%
14.83%
-17.93%
-21.80%
4.25%
24.74%
2.03%
-2.65%
9.82%
11.79%
6.16%
-4.88%
6.72%
6.28%
-4.85%
4.95%
 8.94%
6.38%
-5.45%
-4.67%
8.64%
-1.38%
4.39%
4.44%
-1.65%
4.59%
3.73%
4.40%
-1.38%
4.69%
0.92%
-2.78%
0.32%
-4.97%
-11.03%
12.38%
-3.68%
4.45%
6.25%
-0.71%
4.32%
2.72%
-3.98%
5.62%
2.33%
0.26%
-0.82%
-0.43%
-0.62%
3.06%
4.20%
1.28%
3.23%
5.56%
-6.85%
-2.38%
0.56%
-6.54%
3.40%
3.91%
-4.86%
0.82%
3.49%
4.53%
0.37%
 2.85%
2.83%
1.10%
-0.18%
3.33%
-5.82%
8.32%
2.30%
0.95%
TASK 1: compute the statistics for stocks, bonds and for an equally weighted portfolio of stocks and

Mean Standard Deviation equal weights

Equity 9.056% 15.568% 50%
Tbond 6.015% 7.047% 50%

CORRELATION MATRIX
Equity Tbond CORRELATION AND VARIANCE-
Equity #REF! #REF! BEEN COMPUTED USING FORM
Tbond #REF! #REF! MATRIX IS COMPUTED WITH C
VARCOV MATRIX IS COMPUTED
VARCOV
Equity Tbond
Equity #REF! #REF!
Tbond #REF! #REF!

Statistics equally weighted portfolio

Portfolio Mean 7.54%
Portfolio Variance #REF!
Standard Deviation 7.96% THE GLOBAL MINIMUM VARIA
THE LOWEST POSSIBLE VARIA
THE SOLVER AND MINIMIZE PO
Statistics for GMVP WEIGHTS SUMMING TO 1
Portfolio Mean 6.65%
Portfolio Variance #REF!
Standard Deviation 5.94%
portfolio of stocks and bonds. Compute Global Minimum Variance Portfolio

GMVP Equity TBond Equally weight

21%
79%
1.00 10.000%

9.000%
LATION AND VARIANCE-COVARIANCE MATRIX HAVE
OMPUTED USING FORMULAS. CORRELATION

Exp. Return
X IS COMPUTED WITH CORREL FORMULA, THE 8.000%
V MATRIX IS COMPUTED COVAR FORMULA
7.000%

6.000%

5.000%
5.000% 7.000% 9.000% 11.000%
Risk (standard deviati

OBAL MINIMUM VARIANCE PORTFOLIO IS THE ONE THAT HAS

WEST POSSIBLE VARIANCE. TO COMPUTE IT I NEED TO USE
LVER AND MINIMIZE PORTFOLIO VARIANCE, SUBJECT TO
TS SUMMING TO 1
TBond Equally weighted portfolio GMVP

9.000% 11.000% 13.000% 15.000% 17.000%

Risk (standard deviation)
TASK 2: Plot the efficient frontier using the solver

Mean Standard Deviation

Equity 9.056% 15.568%
Tbond 6.015% 7.047%

CORRELATION MATRIX
Equity Tbond
Equity #REF! #REF!
Tbond #REF! #REF!

VARCOV
Equity Tbond
Equity #REF! #REF!
Tbond #REF! #REF!

Point 1 Weights
Target Mean 7%
Portfolio Mean 7.00% 32.4%
Portfolio Variance #REF! 67.6%
Standard Deviation 6.30% 100.0%

Point 2
Target Mean 8%
Portfolio Mean 8.00% 65.3%
Portfolio Variance #REF! 34.7%
Standard Deviation 10.03% 100.0%

Point 3
Target Mean 9%
Portfolio Mean 9.00% 98.2%
Portfolio Variance #REF! 1.8%
Standard Deviation 15.26% 100.0%

Point 4
Target Mean 10%
Portfolio Mean 10.00% 131.0%
Portfolio Variance #REF! -31.0%
Standard Deviation 20.89% 100.0%
 11.000%

10.000%

9.000%

Exp. Return
8.000%

7.000%

6.000%

5.000%
0% 0% 0% 00
%
00
%
00 00 00 0 0 .0
0
5. 7. 9. 1 1.
1 3 .
1 5
Risk (standard devi

For the plot

1 2 3 4
Mean 7% 8% 9% 10%
Standard Dev 6.30% 10.03% 15.26% 20.89%
% % % % % % % %
0 00 0 00 0 00 0 00 0 00 0 00 0 00
. . . . . . .
11 (standard
Risk 13 15
deviation) 17 19 21 23
TASK 3: Compute the tangency portfolio in a multi asset framework with risk free asset available

Standard
Mean Weights
Deviation
Tbond 6.01% 7.05% 71%
Cbond 7.30% 9.03% -1%
Equity 9.06% 15.57% 25%
Real Estate 10.00% 19.64% 6%
100%
CORRELATION MATRIX

Tbond Cbond Equity Realestate

Tbond 1 0.6705432941 -0.1751596896 -0.00489625826
Cbond 0.6705432941 1 0.24010679681 0.351344059388
Equity -0.1751596896 0.2401067968 1 0.585746761888
Realestate -0.0048962583 0.3513440594 0.58574676189 1

VARCOV MATRIX
Tbond Cbond Equity Realestate
Tbond 0.0050 0.0043 - 0.0019 - 0.0001
Cbond 0.0043 0.0082 0.0034 0.0062
Equity - 0.0019 0.0034 0.0242 0.0179
Realestate - 0.0001 0.0062 0.0179 0.0386

Risk Free Rate 2.64%

Portfolio Mean 7.0%

Portfolio Variance 0.004
Standard Deviation 6.18%

Portfolio Sharpe Ratio 0.70

ee asset available

THE BIG DIFFERENCE HERE WITH RESPECT TO THE

PREVIOUS CASE IS THAT NOW WE ASSUME THAT THE
INVESTOR CAN FREELY BORROW AND LEND MONEY AT
THE RISK FREE RATE