Exercise

# Tangency portfolio and T-bills

In the previous exercise, you calculated the composition of the tangency portfolio. As a second step, you create new portfolios that are a combination of T-bills and this tangency portfolio. First, you will need to compute the expected portfolio return and volatility for these portfolios. Second, your job is to create a plot of these portfolios with the volatility on the x-axis and the expected return on the y-axis.

Instructions

**100 XP**

- Calculate the expected portfolio returns
`mu_portfolio_tangency_bill`

and portfolio volatilities`sigma_portfolio_tangency_bill`

for the set of weights and indicate the proportion that was invested in the tangency portfolio (`tangency_weights`

). - Add these new portfolios to the plot that you constructed in the previous exercise with the help of the
`points()`

function. For the color code argument use`col = "blue"`

, for the type use`type = "b"`

, and as a plotting character use`pch = 16`

.