Essay About Small Portfolio And Optimal Portfolio

Investment Case
Our friend, John has recently inherited $50,000 and he is interested in investing it.
Because of my experience, he came to me first, but due to my heavy work load, I do not
have the time to give him any detailed advice. I thought since you are doing that
Investment paper, you should be able to apply some of your knowledge and help him
out. He wants to be able to invest by himself later on, so in addition to
recommendations on what to do with the money, he wants to know the basics about
investing and clear explanations on anything you have done.
Since it is a small portfolio and he has not got a lot of time, and with transaction costs it
is not worth him taking on too many stocks. I have suggested a two-stock portfolio
with the risk-free asset. So please just focus on one company from the S&P 500, and
pick two companies from the NASDAQ. Please choose one of the two NASDAQ stocks
(remember, explain your choice) to construct the optimal portfolio with the S&P 500
company you selected. Then use John’s answers (your own answers) to the utility
questionnaire to determine how he should allocate his money (forming the complete
portfolio using the right optimal risky portfolio and the risk-free asset). The annual risk
free rate is 1% and the sample period is from 1 July 2005 to 2 July 2012.
When you choose your S&P 500 company, choose one which pays dividends, as he