Problem 11-26 Using the data below, calculate the expected return and the volatility (standard deviation) of a portfolio consisting of Johnson &Johnson's and Walgreen's stocks using a wide range of portfolio weights. Correlation between Johnson & Johnson and Walgreen's Johnson & Johnson Walgreen Company E[R] SD[R] 7.00% 16.00% 10.00% 20.00% Covariance between Johnson & Johnson and Walgreen's Weight in Johnson & Johnson's 0 0.05 Weight in Walgreen's 1 0.95 E[Rp] SD[Rp] 0.22 0.1 0.15 0.2 0.25 0.3 0.35 0.4 0.45 0.5 0.55 0.6 0.65 0.7 0.75 0.8 0.85 0.9 0.95 1 0.9 0.85 0.8 0.75 0.7 0.65 0.6 0.55 0.5 0.45 0.4 0.35 0.3 0.25 0.2 0.15 0.1 0.05 0 dard deviation) of a portfolio consisting of o weights. Risk-return combinatio 120.00% 100.00% 80.00% 80.00% 60.00% 40.00% 20.00% 0.00% 0.00% 20.00% 40.00% 60.00% return combination Risk-return combination 80.00% 100.00% 120.00% Problem 10-28 Use the return data on the sheet "Return Data" containing the realized return of the S&P 5 divide the sample into four periods of 20 years each. For each 20-year period, calculate th earned given a $1000 initial investment. Final value of initial $1000 investment Period 1929 1949 1969 1989 - 1948 1968 1988 2008 alized return of the S&P 500 from 1929-2008. Starting in 1929, 20-year period, calculate the final amount an investor would have Data for Figure 10.1 Yearly returns from 1926-2006 for the S&P 500, small stocks, corporate bonds, world portfol Treasury bills, and inflation (as measured by the CPI). Year S&P 500 Small Stocks 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 0.11138 0.37125 0.43308 -0.08906 -0.25256 -0.43861 -0.08854 0.52880 -0.02341 0.47221 0.32796 -0.35258 0.33204 -0.00914 -0.10078 -0.11770 0.21073 0.25763 0.19688 0.36462 -0.08179 0.05238 0.05099 0.18065 0.30581 0.24554 0.18501 -0.01100 0.52404 0.31429 0.06628 -0.10854 0.43344 0.11904 0.00483 0.01086 0.31372 0.65359 -0.43081 -0.44698 -0.54676 -0.00471 2.16138 0.57195 0.69112 0.70023 -0.56131 0.08928 0.04327 -0.28063 -0.06523 0.80778 1.22973 0.69830 0.95416 -0.18354 0.02814 -0.02094 0.23075 0.58002 0.04543 0.00881 -0.04231 0.65710 0.26917 -0.01592 -0.13264 0.78319 0.15392 -0.06802 Corp Bonds World Portfolio 0.06285 0.06550 0.03378 0.04320 0.06343 -0.02380 0.12199 0.05255 0.09728 0.06860 0.06219 0.02546 0.04357 0.04247 0.04512 0.01788 0.03119 0.03365 0.03101 0.03512 0.02558 0.00450 0.03707 0.04327 0.01891 -0.00210 0.03427 0.02061 0.04658 0.01076 -0.01792 0.04469 0.00849 0.00157 0.06722 0.22800 0.25326 0.33463 -0.07692 -0.22574 -0.39305 0.03030 0.66449 0.02552 0.22782 0.19283 -0.16950 0.05614 -0.01441 0.03528 0.18744 0.01189 0.19895 -0.10240 0.11032 -0.15124 0.03196 -0.05730 0.05421 0.25477 0.22446 0.15822 0.04838 0.49823 0.24739 0.06581 -0.06017 0.34456 0.23303 0.03492 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 0.26811 -0.08784 0.22692 0.16357 0.12356 -0.10104 0.23942 0.11002 -0.08465 0.03940 0.14301 0.18995 -0.14689 -0.26467 0.37229 0.23927 -0.07156 0.06571 0.18609 0.32504 -0.04923 0.21547 0.22555 0.06274 0.31727 0.18665 0.05250 0.16608 0.31686 -0.03103 0.30464 0.07619 0.10079 0.01320 0.37578 0.22960 0.33363 0.28579 0.21042 -0.09104 -0.11886 -0.22101 0.28332 -0.08153 0.16669 0.28083 0.49686 -0.13310 0.93378 0.62507 -0.27135 -0.08335 0.20339 0.03511 -0.32081 -0.22968 0.74988 0.56976 0.20525 0.20170 0.44845 0.22942 0.17527 0.39493 0.51862 -0.07693 0.37243 0.04526 -0.09641 0.21462 0.09925 -0.33080 0.38226 0.27630 0.29116 -0.00138 0.32127 0.17430 0.18947 -0.04355 0.18920 0.02640 0.21706 0.13862 0.03681 0.06204 0.03167 0.03988 0.02082 -0.00255 -0.01163 0.22457 -0.02459 0.11179 0.09682 0.08323 0.02987 0.00233 0.11039 0.14557 0.05510 0.01833 -0.01558 -0.04976 0.08977 0.34898 0.07317 0.17103 0.29486 0.20913 -0.01578 0.13793 0.15310 0.08606 0.15869 0.10642 0.14662 -0.02435 0.21991 0.04239 0.10847 0.10908 -0.03037 0.11694 0.11461 0.11182 0.20778 -0.06212 0.15381 0.11247 0.09832 -0.10116 0.21283 0.13941 -0.03858 -0.01984 0.19567 0.23547 -0.14506 -0.24480 0.34493 0.14712 0.02002 0.18216 0.12671 0.27721 -0.03305 0.11272 0.23280 0.05773 0.41770 0.42799 0.16764 0.23950 0.17194 -0.16517 0.18966 -0.04660 0.23129 0.05584 0.21318 0.13993 0.16227 0.24795 0.25354 -0.12928 -0.16521 -0.19541 2003 2004 2005 2006 2007 2008 0.28685 0.10882 0.04911 0.15795 0.05494 -0.36998 0.51567 0.17284 0.07152 0.19818 0.00903 -0.30190 0.09229 0.06510 0.07763 0.04139 0.04742 0.13449 0.33761 0.15247 0.10023 0.20652 0.09566 -0.40334 ks, corporate bonds, world portfolio, red by the CPI). Treasury Bills CPI 0.03295 0.03153 0.04048 0.04471 0.02266 0.01153 0.00882 0.00516 0.00265 0.00171 0.00173 0.00267 0.00060 0.00042 0.00037 0.00137 0.00345 0.00381 0.00381 0.00381 0.00381 0.00618 0.01061 0.01122 0.01219 0.01557 0.01745 0.01867 0.00927 0.01800 0.02664 0.03276 0.01713 0.03477 0.02813 -0.01117 -0.02260 -0.01156 0.00585 -0.06395 -0.09317 -0.10274 0.00763 0.01515 0.02985 0.01449 0.02857 -0.02778 0.00000 0.00714 0.09929 0.09032 0.02959 0.02299 0.02247 0.18132 0.08837 0.02991 -0.02075 0.05932 0.06000 0.00755 0.00749 -0.00743 0.00375 0.02985 0.02899 0.01761 0.01730 0.01361 0.02401 0.02823 0.03226 0.03620 0.04056 0.04944 0.04393 0.05494 0.06898 0.06495 0.04365 0.04231 0.07289 0.07994 0.05870 0.05067 0.05453 0.07640 0.10564 0.12103 0.14596 0.10938 0.08994 0.09896 0.07710 0.06089 0.05877 0.06939 0.08436 0.07690 0.05428 0.03482 0.03031 0.04385 0.05606 0.05136 0.05190 0.04856 0.04802 0.05981 0.03328 0.01607 0.00671 0.01333 0.01645 0.00971 0.01923 0.03459 0.03040 0.04720 0.06197 0.05570 0.03266 0.03406 0.08706 0.12338 0.06936 0.04865 0.06701 0.09018 0.13294 0.12516 0.08922 0.03830 0.03791 0.03949 0.03799 0.01098 0.04434 0.04419 0.04647 0.06106 0.03064 0.02901 0.02748 0.02675 0.02538 0.03322 0.01702 0.01612 0.02685 0.03387 0.01552 0.02377 0.01026 0.01432 0.03305 0.04966 0.04523 0.01244 0.01879 0.03256 0.03416 0.02541 0.04081 0.00091 
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