ANNUAL STOCK PRICE AND RETURN DATA FOR SIX STOCKS

PRICE DATA
DATE GE MSFT JNJ K BA IBM PRICE DATA GIVEN
4-Jan-93 2.36 2.68 6.78 20.37 2.34 11.79
3-Jan-94 4.15 2.64 7.2 18.47 4.21 14.62 RETURNS DATA
3-Jan-95 4.98 3.68 10.91 19.9 4.2 15.53 CELL B19
2-Jan-96 8.8 5.73 19.43 29.03 8.09 20.41 COPY ROWAND DRAG FOR
2-Jan-97 13.51 12.64 24.44 27.59 13.93 30.78
2-Jan-98 21.64 18.49 29.15 38.01 20.19 31.6 AVERAGE
4-Jan-99 30.57 43.37 38.04 34.14 23.47 30.94 STDDEV
3-Jan-00 40.51 48.51 39.36 20.93 36.27 39.24 VAR
2-Jan-01 42.42 30.26 43.8 23.52 48.13 48.78
2-Jan-02 34.82 31.58 55.19 28.7 41.39 51.05 EXCESS RETURN
2-Jan-03 22.25 23.52 52.15 32 32.81 59.63
2-Jan-04 31.86 28.16 51.49 37.36 48.86 81.95 VAR-COV MATRIX
STEP1
RETURNS DATA
DATE GE MSFT JNJ K BA IBM STEP2
3-Jan-94 56.44% -1.50% 6.01% -9.79% 58.73% 21.51%
3-Jan-95 18.23% 33.21% 41.56% 7.46% -0.24% 6.04% STEP3
2-Jan-96 56.93% 44.28% 57.71% 37.76% 65.55% 27.33% STEP 4
2-Jan-97 42.87% 79.12% 22.94% -5.09% 54.34% 41.08% STEP5
2-Jan-98 47.11% 38.04% 17.62% 32.04% 37.11% 2.63% STEP 6
4-Jan-99 34.55% 85.25% 26.62% -10.74% 15.05% -2.11% STEP 7
3-Jan-00 28.15% 11.20% 3.41% -48.93% 43.53% 23.76% STEP 8
2-Jan-01 4.61% -47.19% 10.69% 11.67% 28.29% 21.76% STEP9
2-Jan-02 -19.74% 4.27% 23.11% 19.90% -15.09% 4.55% STEP10
2-Jan-03 -44.78% -29.47% -5.67% 10.88% -23.23% 15.54% STEP 11
2-Jan-04 35.90% 18.01% -1.27% 15.49% 39.82% 31.80%

AVERAGE 23.66% 21.38% 18.43% 5.51% 27.63% 17.63%

STD DEV 32.17% 40.71% 18.97% 23.86% 29.93% 13.56%
VARIANCE 10.35% 16.57% 3.60% 5.70% 8.96% 1.84%

EXCESS RETURNS
DATE GE MSFT JNJ K BA IBM
3-Jan-94 32.78% -22.89% -12.42% -15.31% 31.11% 3.89%
 3-Jan-95 -5.43% 11.83% 23.13% 1.94% -27.86% -11.59%
2-Jan-96 33.27% 22.90% 39.28% 32.25% 37.93% 9.70%
2-Jan-97 19.21% 57.73% 4.51% -10.60% 26.72% 23.46%
2-Jan-98 23.45% 16.65% -0.81% 26.53% 9.49% -15.00%
4-Jan-99 10.89% 63.87% 8.19% -16.25% -12.57% -19.74%
3-Jan-00 4.49% -10.18% -15.02% -54.44% 15.90% 6.14%
2-Jan-01 -19.05% -68.58% -7.74% 6.15% 0.67% 4.14%
2-Jan-02 -43.40% -17.11% 4.68% 14.39% -42.71% -13.08%
2-Jan-03 -68.45% -50.85% -24.10% 5.37% -50.86% -2.09%
2-Jan-04 12.24% -3.38% -19.70% 9.97% 12.20% 14.17%

VARIANCE -COVARIANCE MATRIX

GE MSFT JNJ K BA IBM
GE 10.35% 7.58% 2.22% -0.43% 8.57% 1.23%
MSFT 7.58% 16.57% 4.12% -0.52% 3.79% -0.22%
JNJ 2.22% 4.12% 3.60% 1.81% 1.01% -0.39%
K -0.43% -0.52% 1.81% 5.70% -0.76% -0.46%
BA 8.57% 3.79% 1.01% -0.76% 8.96% 2.48%
IBM 1.23% -0.22% -0.39% -0.46% 2.48% 1.84%
 VAR-COV MATRIX SIMON BENINGER TEXT BOOK ON FINANCIAL MODELLING

DATA GIVEN

FORMULA 0.564447 LN(B5/B4)

OWAND DRAG FOR THE ALL SIX COLUMN DOWN

23.66% AVERAGE(B19:B29)
32.17% STDDEV(B19:B29) DRAG AND COPY ACROSS ROW
10.35% VAR(B19:B29) DRAG ACROSS AND COPY ROW

32.78% 32.78% B19-B31

OV MATRIX
FORMULA TYPE IN CELL B52AAS FOLLOWS
(MMULT(TRANSPOSE(B38:G48),
AFTER COMMA ABOVE
B38:G48)/10 SAMPLE SIZE OF EXCESS RETURN N
HENCE DIVIDE BY 10
PRESS )
PRESS SHIFT+CTRL+ENTER ARRAY
YOU GET ONE VALUE OF CELL B 52)
FROM THAT CELL COVER THE ENTIRE SIX BY SIX MATRIX
GOTO FORMULA BAR PRESS ENTER
AGAIN PRESS SHIFT+CTRL+ENTER ARRAY
YOU GET THE VARIANCE -COVARIANCE MATRIX
VERIFY YELLOW SHADED
 VARIANCE -COVARIANCE MATRIX
GE MSFT JNJ K BA IBM
GE 0.10350 0.07585 0.02216 -0.00430 0.08575 0.01230
MSFT 0.07585 0.16574 0.04123 -0.00517 0.03793 -0.00224
JNJ 0.02216 0.04123 0.03597 0.01811 0.01010 -0.00393
K -0.00430 -0.00517 0.01811 0.05695 -0.00762 -0.00462
BA 0.08575 0.03793 0.01010 -0.00762 0.08957 0.02482
IBM 0.01230 -0.00224 -0.00393 -0.00462 0.02482 0.01839
NCIAL MODELLING

11
ESTIMATING VALUE AT RISK (VaR) USING THE VARIANCE-COVARIANCE MATRIX
VARIANCE -COVARIANCE MATRIX
GE MSFT JNJ K BA IBM WEIGHTS
GE 0.1035 0.0758 0.0222 -0.0043 0.0857 0.0123 0.3670
MSFT 0.0758 0.1657 0.0412 -0.0052 0.0379 -0.0022 0.3336
JNJ 0.0222 0.0412 0.0360 0.0181 0.0101 -0.0039 0.1668
K -0.0043 -0.0052 0.0181 0.0570 -0.0076 -0.0046 0.0168
BA 0.0857 0.0379 0.0101 -0.0076 0.0896 0.0248 0.0447
IBM 0.0123 -0.0022 -0.0039 -0.0046 0.0248 0.0184 0.0710

AVERAGE 24% 21% 18% 6% 28% 18%

PORTFOLIO
MEAN RETURN 21.47% MMULT($B$12:$G$12,I4:I9)
VARIANCE MMULT(MMULT(TRANSPOSE(I4:I9),B4:G9),I4:I9
STANDARD DEVIATION
0.3670 0.3336 0.1668
INVESTMENT 1000
CUTOFFPOINT 800
PROBABILITY 5.036%
 VARIANCE -COVARIANCE MATRIX
GE MSFT JNJ K BA IBM
GE 0.1035 0.0758 0.0222 -0.0043 0.0857 0.0123
MSFT 0.0758 0.1657 0.0412 -0.0052 0.0379 -0.0022
JNJ 0.0222 0.0412 0.0360 0.0181 0.0101 -0.0039
K -0.0043 -0.0052 0.0181 0.0570 -0.0076 -0.0046
BA 0.0857 0.0379 0.0101 -0.0076 0.0896 0.0248
IBM 0.0123 -0.0022 -0.0039 -0.0046 0.0248 0.0184

ANSPOSE(I4:I9),B4:G9),I4:I9)

0.0168 0.0447 0.0710

ANNUAL STOCK PRICE AND RETURN DATA FOR SIX STOCKS
PRICE DATA
DATE GE MSFT JNJ K BA
4-Jan-93 2.36 2.68 6.78 20.37 2.34
3-Jan-94 4.15 2.64 7.2 18.47 4.21
3-Jan-95 4.98 3.68 10.91 19.9 4.2
2-Jan-96 8.8 5.73 19.43 29.03 8.09
2-Jan-97 13.51 12.64 24.44 27.59 13.93
2-Jan-98 21.64 18.49 29.15 38.01 20.19
4-Jan-99 30.57 43.37 38.04 34.14 23.47
3-Jan-00 40.51 48.51 39.36 20.93 36.27
2-Jan-01 42.42 30.26 43.8 23.52 48.13
2-Jan-02 34.82 31.58 55.19 28.7 41.39
2-Jan-03 22.25 23.52 52.15 32 32.81
2-Jan-04 31.86 28.16 51.49 37.36 48.86

SHARES O/S 10.56 10.86 2.37 0.41 0.84

MKT VALUE 336.4416 305.8176 122.0313 15.3176 41.0424
% OF PORT 0.3800 0.3454 0.1378 0.0173 0.0464
 IBM
11.79
14.62
15.53
20.41
30.78
31.6
30.94
39.24
48.78
51.05
59.63
81.95

0.79
64.7405 885.39
0.0731 1
sum
ANNUAL STOCK PRICE AND RETURN DATA FOR SIX STOCKS
PRICE DATA
DATE GE MSFT JNJ K BA IBM
4-Jan-93 2.36 2.68 6.78 20.37 2.34 11.79
3-Jan-94 4.15 2.64 7.2 18.47 4.21 14.62
3-Jan-95 4.98 3.68 10.91 19.9 4.2 15.53
2-Jan-96 8.8 5.73 19.43 29.03 8.09 20.41
2-Jan-97 13.51 12.64 24.44 27.59 13.93 30.78
2-Jan-98 21.64 18.49 29.15 38.01 20.19 31.6
4-Jan-99 30.57 43.37 38.04 34.14 23.47 30.94
3-Jan-00 40.51 48.51 39.36 20.93 36.27 39.24
2-Jan-01 42.42 30.26 43.8 23.52 48.13 48.78
2-Jan-02 34.82 31.58 55.19 28.7 41.39 51.05
2-Jan-03 22.25 23.52 52.15 32 32.81 59.63
2-Jan-04 31.86 28.16 51.49 37.36 48.86 81.95
RETURNS DATA
DATE GE MSFT JNJ K BA IBM
3-Jan-94 0.5644 -0.0150 0.0601 -0.0979 0.5873 0.2151
3-Jan-95 0.1823 0.3321 0.4156 0.0746 -0.0024 0.0604
2-Jan-96 0.5693 0.4428 0.5771 0.3776 0.6555 0.2733
2-Jan-97 0.4287 0.7912 0.2294 -0.0509 0.5434 0.4108
2-Jan-98 0.4711 0.3804 0.1762 0.3204 0.3711 0.0263
4-Jan-99 0.3455 0.8525 0.2662 -0.1074 0.1505 -0.0211
3-Jan-00 0.2815 0.1120 0.0341 -0.4893 0.4353 0.2376
2-Jan-01 0.0461 -0.4719 0.1069 0.1167 0.2829 0.2176
2-Jan-02 -0.1974 0.0427 0.2311 0.1990 -0.1509 0.0455
2-Jan-03 -0.4478 -0.2947 -0.0567 0.1088 -0.2323 0.1554
2-Jan-04 0.3590 0.1801 -0.0127 0.1549 0.3982 0.3180

AVERAGE 0.2366 0.2138 0.1843 0.0551 0.2763 0.1763

VARIANCE 0.1035 0.1657 0.0360 0.0570 0.0896 0.0184
STD DEV 0.3217 0.4071 0.1897 0.2386 0.2993 0.1356
EXCESS RETURNS
DATE GE MSFT JNJ K BA IBM
3-Jan-94 0.3278 -0.2289 -0.1242 -0.1531 0.3111 0.0389
3-Jan-95 -0.0543 0.1183 0.2313 0.0194 -0.2786 -0.1159
2-Jan-96 0.3327 0.2290 0.3928 0.3225 0.3793 0.0970
2-Jan-97 0.1921 0.5773 0.0451 -0.1060 0.2672 0.2346
2-Jan-98 0.2345 0.1665 -0.0081 0.2653 0.0949 -0.1500
4-Jan-99 0.1089 0.6387 0.0819 -0.1625 -0.1257 -0.1974
3-Jan-00 0.0449 -0.1018 -0.1502 -0.5444 0.1590 0.0614
2-Jan-01 -0.1905 -0.6858 -0.0774 0.0615 0.0067 0.0414
2-Jan-02 -0.4340 -0.1711 0.0468 0.1439 -0.4271 -0.1308
2-Jan-03 -0.6845 -0.5085 -0.2410 0.0537 -0.5086 -0.0209 FOR VAR-COV MATRIX IN EX
2-Jan-04 0.1224 -0.0338 -0.1970 0.0997 0.1220 0.1417 STEP
1
VARIANCE COVARIANCE MATRIX 2
GE MSFT JNJ K BA IBM 3
GE 0.1035 0.0758 0.0222 -0.0043 0.0857 0.0123 4
MSFT 0.0758 0.1657 0.0412 -0.0052 0.0379 -0.0022 5
JNJ 0.0222 0.0412 0.0360 0.0181 0.0101 -0.0039 6
K -0.0043 -0.0052 0.0181 0.0570 -0.0076 -0.0046 7
BA 0.0857 0.0379 0.0101 -0.0076 0.0896 0.0248 8
IBM 0.0123 -0.0022 -0.0039 -0.0046 0.0248 0.0184
FOR VAR-COV MATRIX IN EXCEL

TYPE IN CELL B52 (MMULT(TRANSPOSE(B38:G48),B38:G48)/10)

PRESS SHIFT+CTRL+ENTER
B52 YOU GET ONE VALUE
PRESS CTRL AND SELECT CELLS B52 TO G57
GO TO FORMULA BAR
PRESS SHIFT+CTRL+ENTER
YOU GET VAR COV MATRIX
VERIFY DIAGONAL ELEMENTS VARIANCE
 VARIANCE COVARIANCE MATRIX
GE MSFT JNJ K
GE 0.1035 0.0758 0.0222 -0.0043
MSFT 0.0758 0.1657 0.0412 -0.0052
JNJ 0.0222 0.0412 0.0360 0.0181
K -0.0043 -0.0052 0.0181 0.0570
BA 0.0857 0.0379 0.0101 -0.0076
IBM 0.0123 -0.0022 -0.0039 -0.0046

RETURNS 0.2366 0.2138 0.1843 0.0551

PORTFOLIO
MEAN RETURN 0.2158 MMULT($B$12:$G$12,I4
VARIANCE 0.0668 MMULT(MMULT(TRANSP
STD DEV 0.2585 SHIFT+CTRL+ENTER
 WEIGHTS
BA IBM
0.0857 0.0123 0.3800
0.0379 -0.0022 0.3454
0.0101 -0.0039 0.1378
-0.0076 -0.0046 0.0173
0.0896 0.0248 0.0464
0.0248 0.0184 0.0731

0.2763 0.1763

MMULT($B$12:$G$12,I4:I9)
MMULT(MMULT(TRANSPOSE(I4:I9),B4:G9),I4:I9)
SHIFT+CTRL+ENTER
CORRELATION

VARIANCE COVARIANCE MATRIX

GE MSFT JNJ K BA IBM
GE 0.103503 0.075849 0.022159 -0.0043 0.085745 0.0123
MSFT 0.075849 0.165744 0.041228 -0.00517 0.037925 -0.00224
JNJ 0.022159 0.041228 0.035968 0.018111 0.010101 -0.00393
K -0.0043 -0.00517 0.018111 0.056953 -0.00762 -0.00462
BA 0.085745 0.037925 0.010101 -0.00762 0.089571 0.024823
IBM 0.0123 -0.00224 -0.00393 -0.00462 0.024823 0.018391

STD DEV 0.3217 0.4071 0.1897 0.2386 0.2993 0.1356

STD DEV 0.3217 0.4071 0.1897 0.2386 0.2993 0.1356

VARIANCE COVARIANCE MATRIX
GE MSFT JNJ K BA IBM
GE 0.103503 0.075849 0.022159 -0.0043 0.085745 0.0123
MSFT 0.075849 0.165744 0.041228 -0.00517 0.037925 -0.00224
JNJ 0.022159 0.041228 0.035968 0.018111 0.010101 -0.00393
K -0.0043 -0.00517 0.018111 0.056953 -0.00762 -0.00462
BA 0.085745 0.037925 0.010101 -0.00762 0.089571 0.024823
IBM 0.0123 -0.00224 -0.00393 -0.00462 0.024823 0.018391

STD DEV 0.321719 0.407117 0.189652 0.238648 0.299284 0.135615

correlation matrix
GE MSFT JNJ K BA IBM
GE 1 0.5791 0.2870 -0.0950 1.2005 0.3030
MSFT 0.5791 1 0.0885 0.0286 0.0144 0.0223
JNJ 0.2870 0.0885 1 0.0228 0.0127 -0.0018
K -0.0950 0.0286 0.0228 1 -0.0096 -0.0021
BA 1.2005 0.0144 0.0127 -0.0096 1 0.0112
IBM 0.3030 0.0223 -0.0018 -0.0021 0.0112 1
ONE standard deviation matrix THREE
GE MSFT JNJ K BA IBM
GE 0.3217 0.0000 0.0000 0.0000 0.0000 0.0000
MSFT 0.0000 0.4071 0.0000 0.0000 0.0000 0.0000
JNJ 0.0000 0.0000 0.1897 0.0000 0.0000 0.0000
K 0.0000 0.0000 0.0000 0.2386 0.0000 0.0000
BA 0.0000 0.0000 0.0000 0.0000 0.2993 0.0000
IBM 0.0000 0.0000 0.0000 0.0000 0.0000 0.1356
TWO covariance matrix correlation matrix verified
GE MSFT JNJ K BA IBM FIVE
GE 0.1035 0.0758 0.0222 -0.0043 0.0857 0.0123
MSFT 0.0758 0.1657 0.0412 -0.0052 0.0379 -0.0022
JNJ 0.0222 0.0412 0.0360 0.0181 0.0101 -0.0039
K -0.0043 -0.0052 0.0181 0.0570 -0.0076 -0.0046
BA 0.0857 0.0379 0.0101 -0.0076 0.0896 0.0248
IBM 0.0123 -0.0022 -0.0039 -0.0046 0.0248 0.0184
FOUR std dev inverse
GE MSFT JNJ K BA IBM
GE 3.1083 0.0000 0.0000 0.0000 0.0000 0.0000
MSFT 0.0000 2.4563 0.0000 0.0000 0.0000 0.0000
JNJ 0.0000 0.0000 5.2728 0.0000 0.0000 0.0000 step
K 0.0000 0.0000 0.0000 4.1903 0.0000 0.0000
BA 0.0000 0.0000 0.0000 0.0000 3.3413 0.0000
IBM 0.0000 0.0000 0.0000 0.0000 0.0000 7.3738

HOW TO CALCULATE SD INVERSE MATRIX

STEP 1 SELECT BOX 6*6 C19:H24)
STEP 2 FORMULA BAR TYPE MINVERSE(SELECT SD MATRIX)
STEP3 CTRL+SHIFT+ENTER
STEP 4 GET SD INVERSE MATRIX
 correlation matrix
GE MSFT JNJ K BA IBM
GE 1 0.5791 0.2870 -0.0950 1.2005 0.3030
MSFT 0.5791 1 0.0885 0.0286 0.0144 0.0223
JNJ 0.2870 0.0885 1 0.02279 0.0127 -0.0018
K -0.0950 0.0286 0.0228 1 -0.0096 -0.0021
BA 1.2005 0.0144 0.0127 -0.0096 1 0.0112
IBM 0.3030 0.0223 -0.0018 -0.0021 0.0112 1
correlation matrix verified
GE MSFT JNJ K BA IBM
GE 1 0.5791 0.3632 -0.0560 0.8905 0.2819
MSFT 0.5791 1.0000 0.5340 -0.0532 0.3113 -0.0406
JNJ 0.3632 0.5340 1 0.4002 0.1780 -0.1529
K -0.0560 -0.0532 0.4002 1 -0.1067 -0.1427
BA 0.8905 0.3113 0.1780 -0.1067 1 0.6116
IBM 0.2819 -0.0406 -0.1529 -0.1427 0.6116 1

formula
1 cov = drd
2 r= dinv cov dinv
how toget correlation matrix verified
1 select cells by pressing ctrl L11 : Q16
2 MMULT(MMULT( MATA,MATB),MATC)
3 PRESS CTRL+SHIFT+ENTER
4 GET CORREL MATRIX VERIFIED AS ABOVE
EXCESS RETURNS variance covariance matrix
DATE GE MSFT JNJ K BA IBM
3-Jan-94 0.3278 -0.2289 -0.1242 -0.1531 0.3111 0.0389 GE
3-Jan-95 -0.0543 0.1183 0.2313 0.0194 -0.2786 -0.1159 MSFT
2-Jan-96 0.3327 0.2290 0.3928 0.3225 0.3793 0.0970 JNJ
2-Jan-97 0.1921 0.5773 0.0451 -0.1060 0.2672 0.2346 K
2-Jan-98 0.2345 0.1665 -0.0081 0.2653 0.0949 -0.1500 BA
4-Jan-99 0.1089 0.6387 0.0819 -0.1625 -0.1257 -0.1974 IBM
3-Jan-00 0.0449 -0.1018 -0.1502 -0.5444 0.1590 0.0614
2-Jan-01 -0.1905 -0.6858 -0.0774 0.0615 0.0067 0.0414 SHARES O/S
2-Jan-02 -0.4340 -0.1711 0.0468 0.1439 -0.4271 -0.1308 MKT VALUE
2-Jan-03 -0.6845 -0.5085 -0.2410 0.0537 -0.5086 -0.0209 % OF PORT
2-Jan-04 0.1224 -0.0338 -0.1970 0.0997 0.1220 0.1417

AVERAGE 0.2366 0.2138 0.1843 0.0551 0.2763 0.1763

VARIANCE 0.1035 0.1657 0.0360 0.0570 0.0896 0.0184
STD DEV 0.3217 0.4071 0.1897 0.2386 0.2993 0.1356
covariance matrix
GE MSFT JNJ K BA IBM
0.1035 0.0758 0.0222 -0.0043 0.0857 0.0123
0.0758 0.1657 0.0412 -0.0052 0.0379 -0.0022
0.0222 0.0412 0.0360 0.0181 0.0101 -0.0039
-0.0043 -0.0052 0.0181 0.0570 -0.0076 -0.0046
0.0857 0.0379 0.0101 -0.0076 0.0896 0.0248
0.0123 -0.0022 -0.0039 -0.0046 0.0248 0.0184

10.56 10.86 2.37 0.41 0.84 0.79

336.44 305.82 122.03 15.318 41.042 64.741 885.39
0.3800 0.3454 0.1378 0.0173 0.0464 0.0731 1.0000
SUM
A) STANDARD DEVIATION MATRIX D

GE MSFT JNJ K BA
GE 0.3217 0.0000 0.0000 0.0000 0.0000
MSFT 0.0000 0.4071 0.0000 0.0000 0.0000
JNJ 0.0000 0.0000 0.1897 0.0000 0.0000
K 0.0000 0.0000 0.0000 0.2386 0.0000
BA 0.0000 0.0000 0.0000 0.0000 0.2993
IBM 0.0000 0.0000 0.0000 0.0000 0.0000

B) VARIANCE COVARIANCE MATRIX

GE MSFT JNJ K BA
GE 0.1035 0.0758 0.0222 -0.0043 0.0857
MSFT 0.0758 0.1657 0.0412 -0.0052 0.0379
JNJ 0.0222 0.0412 0.0360 0.0181 0.0101
K -0.0043 -0.0052 0.0181 0.0570 -0.0076
BA 0.0857 0.0379 0.0101 -0.0076 0.0896
IBM 0.0123 -0.0022 -0.0039 -0.0046 0.0248

E INVERSE OF MATRIX D SD INVERSE

GE MSFT JNJ K BA
GE 3.1083 0.0000 0.0000 0.0000 0.0000
MSFT 0.0000 2.4563 0.0000 0.0000 0.0000
JNJ 0.0000 0.0000 5.2728 0.0000 0.0000
K 0.0000 0.0000 0.0000 4.1903 0.0000
BA 0.0000 0.0000 0.0000 0.0000 3.3413
IBM 0.0000 0.0000 0.0000 0.0000 0.0000
 C) CORRELATION COEFFICIENT MATRIX R

IBM GE MSFT JNJ K BA

0.0000 GE 1 0.5791 0.3632 -0.0560 0.8905
0.0000 MSFT 0.5791 1 0.5340 -0.0030 0.0279
0.0000 JNJ 0.3632 0.5340 1 0.0228 0.0159
0.0000 K -0.0560 -0.0030 0.0228 1 -0.0096
0.0000 BA 0.8905 0.0279 0.0159 -0.0096 1
0.1356 IBM 0.0052 -0.0007 -0.0028 -0.0026 0.0112

D) DRD COV= (SD*CORREL)*SD VERIFIED

IBM GE MSFT JNJ K BA
0.0123 GE 0.1035 0.0758 0.0222 -0.0043 0.0857
-0.0022 MSFT 0.0758 0.1657 0.0412 -0.0003 0.0034
-0.0039 JNJ 0.0222 0.0412 0.0360 0.0010 0.0009
-0.0046 K -0.0043 -0.0003 0.0010 0.0570 -0.0007
0.0248 BA 0.0857 0.0034 0.0009 -0.0007 0.0896
0.0184 IBM 0.0002 0.0000 -0.0001 -0.0001 0.0005

F R= DINV COV DINV VERIFIED

IBM GE MSFT JNJ K BA

0.0000 GE 1 0.5791 0.3632 -0.0560 0.8905
0.0000 MSFT 0.5791 1 0.5340 -0.0532 0.3113
0.0000 JNJ 0.3632 0.5340 1 0.4002 0.1780
0.0000 K -0.0560 -0.0532 0.4002 1 -0.1067
0.0000 BA 0.8905 0.3113 0.1780 -0.1067 1
7.3738 IBM 0.2819 -0.0406 -0.1529 -0.1427 0.6116
 IBM
0.0052
-0.0007
-0.0028
-0.0026
0.0112
1

IBM
0.0002
0.0000
-0.0001
-0.0001
0.0005
0.0184

IBM
0.2819
-0.0406
-0.1529
-0.1427
0.6116
1
1 VARIANCE COVARIANCE MATRIX 2
GE MSFT JNJ K BA IBM
GE 0.1035 0.0758 0.0222 -0.0043 0.0857 0.0123
MSFT 0.0758 0.1657 0.0412 -0.0052 0.0379 -0.0022
JNJ 0.0222 0.0412 0.0360 0.0181 0.0101 -0.0039
K -0.0043 -0.0052 0.0181 0.0570 -0.0076 -0.0046
BA 0.0857 0.0379 0.0101 -0.0076 0.0896 0.0248
IBM 0.0123 -0.0022 -0.0039 -0.0046 0.0248 0.0184

4 CORRELATION COEFFICIENT 3
GE MSFT JNJ K BA IBM
GE 1 0.5791 0.3632 -0.0560 0.8905 0.2819
MSFT 0.5791 1 0.5340 -0.0532 0.3113 -0.0406
JNJ 0.3632 0.5340 1 0.4002 0.1780 -0.1529
K -0.0560 -0.0532 0.4002 1 -0.1067 -0.1427
BA 0.8905 0.3113 0.1780 -0.1067 1 0.6116
IBM 0.2819 -0.0406 -0.1529 -0.1427 0.6116 1

VERIFICATION VARCOV MATRIX

5 GE MSFT JNJ K BA IBM 6
GE 0.1035 0.0758 0.0222 -0.0043 0.0857 0.0123
MSFT 0.0758 0.1657 0.0412 -0.0052 0.0379 -0.0022
JNJ 0.0222 0.0412 0.0360 0.0181 0.0101 -0.0039
K -0.0043 -0.0052 0.0181 0.0570 -0.0076 -0.0046
BA 0.0857 0.0379 0.0101 -0.0076 0.0896 0.0248
IBM 0.0123 -0.0022 -0.0039 -0.0046 0.0248 0.0184
STANDARD DEVIATION MATRIX D

GE MSFT JNJ K BA IBM

GE 0.3217 0.0000 0.0000 0.0000 0.0000 0.0000
MSFT 0.0000 0.4071 0.0000 0.0000 0.0000 0.0000
JNJ 0.0000 0.0000 0.1897 0.0000 0.0000 0.0000
K 0.0000 0.0000 0.0000 0.2386 0.0000 0.0000
BA 0.0000 0.0000 0.0000 0.0000 0.2993 0.0000
IBM 0.0000 0.0000 0.0000 0.0000 0.0000 0.1356

STD DEV INVERSE MATRIX

GE MSFT JNJ K BA IBM
GE 3.1083 0.0000 0.0000 0.0000 0.0000 0.0000
MSFT 0.0000 2.4563 0.0000 0.0000 0.0000 0.0000
JNJ 0.0000 0.0000 5.2728 0.0000 0.0000 0.0000
K 0.0000 0.0000 0.0000 4.1903 0.0000 0.0000
BA 0.0000 0.0000 0.0000 0.0000 3.3413 0.0000
IBM 0.0000 0.0000 0.0000 0.0000 0.0000 7.3738

VERIFICATION CORREL MATRIX

GE MSFT JNJ K BA IBM
GE 1 0.5791 0.3632 -0.0560 0.8905 0.2819
MSFT 0.5791 1 0.5340 -0.0532 0.3113 -0.0406
JNJ 0.3632 0.5340 1 0.4002 0.1780 -0.1529
K -0.0560 -0.0532 0.4002 1 -0.1067 -0.1427
BA 0.8905 0.3113 0.1780 -0.1067 1 0.6116
IBM 0.2819 -0.0406 -0.1529 -0.1427 0.6116 1