QUESTION 5

a) Market Portfolio 0.55%

Treasury Bill 0.12%
Equity Premium 0.43%

b) Standard Deviation 4.52%

Sharpe Ratio 0.095

c) JPM KMB CSCO XOM

Arithmetic Average 0.86% 0.72% 0.41% 0.65%
Standar Deviation 8.91% 4.45% 10.20% 5.01%

JPM KMB CSCO XOM

JPM 1
KMB 0.17 1
CSCO 0.52 0.07 1
XOM 0.25 0.15 0.21 1

d) Monthly Annual
JPM 0.46% 5.52%
KMB 0.63% 7.56%
CSCO -0.12% -1.44%
XOM 0.53% 6.36%
Port
e) Weight in XOM Weight in KMB Port Std Dev Return
100.00% 0.00% 5.01% 0.65%
90.00% 10.00% 4.59% 0.66%
80.00% 20.00% 4.23% 0.66%
70.00% 30.00% 3.94% 0.67%
60.00% 40.00% 3.72% 0.68%
50.00% 50.00% 3.60% 0.69%
40.00% 60.00% 3.58% 0.69%
30.00% 70.00% 3.66% 0.70%
20.00% 80.00% 3.84% 0.71%
10.00% 90.00% 4.11% 0.72%
0.00% 100.00% 4.45% 0.72%
 0.73%
0.72%
0.71%
Portafolio Return

0.70%
0.69%
0.68%
0.67%
0.66%
0.65%
0.64%
3.50% 3.75% 4.00% 4.25% 4.50% 4.75% 5.00% 5.25%
Portafolio Std Deviation

f) No, as shown above you may have bigger returns by investing everything in KMB, nonetheless it is
riskier. The optimal portfolio considering both, less risk with higher returns is 40% in XOM and 60% in
KMB.