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. In the mean-standard deviation space, compute and graph the opportunity set and the
(ex-post) efficient frontier of portfolios allocated among the five stocks, the optimal
portfolio combining the five stocks, and the capital allocation line. Borrowing and
lending activities are possible but short sales of the stocks are allowed.
a. Discuss the performance of the optimal portfolio allocated among the five
stocks compared with each individual performance and with the two portfolios
formed in Question 3, in terms of risk, return, and Sharpe ratio. Use a graph to
support your answer.
b. By combining now the risk-free asset and the five stocks, compute and graph
the optimal complete portfolio of two investors, with a risk aversion of 2 and 4
respectively. Discuss similarities and differences in the allocation among the
stocks and the risk-free asset. Discuss the performance of each complete