1.1 Which of the four portfolio(s) in Table 1 is(are) on the best-possible CAL? Also include an Illustration (i.e. draw separate CALs for each portfolio) to help explain your answer.
1.2 Use the information in Table 1 to calculate the following:
2.1 Measures of historical return and risk for each of the four indices above. Which index performed best over the last 12 months?
2.2 Suppose you are allowed to only invest in the ALSI index and one other index in the table above for the next 12-month period. Use the measures of covariance and correlation to explain which index would probably be the best option to choose.
2.3 Using the table above, calculate the historical return and standard deviation of a portfolio consisting of 2.3.1 60% in the ALSI and 40% in the Shanghai index. 2.3.2 60% in the ALSI and 40% in the Euronext index. 2.3.3 60% in the ALSI and 40% in the Nikkei index.
2.4 Do your answers in question 2.3 support the answer you gave in question 2.2 above? Explain.