CBO-iShares 1-5 year Laddered Corporate Bond Index

CBO-iShares 1-5 year Laddered Corporate Bond Index ETF- and XIU-iShares S&P/TSX 60 Index ETF- are two iShares ETFs tracking and Canadian bond market and Canadian equity market, respectively. Thus, they are popularly used by Canadian investors as proxies for Canadian bond and equity markets.
You can find out the historical closing prices of CBO and XIU from the following website: http://ca.ishares.com/product_info/fund/index.htm
Download the most recent three years weekly date.
Suppose that now you have $80 million to invest for six months and you want to invest those money into CBO, XIU and the Canadian 6-month T-bill. Assume that the interest rate of the 6-month T-bill is 2% per annum.
Use EXCEL to answer following questions:
1. Estimate the weekly expected returns, standard deviations of CBO and XIU, respectively, and their correlation and covariance. Then convert them into those with six-month (26 weeks) horizon.
2. Draw the opportunity set offered by these two securities.

Download Solution

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