City College is a community college with a $100 million endowment. Since its establishment, it has had a fixed investmen

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City College is a community college with a $100 million
endowment. Since its establishment, it has had a fixed investment
policy of 55% stocks (spread 10/15/30 amongst small, medium and
large cap stock portfolios), 35% bond index fund (VBMFX) and 10%
Equity REITs over the years 2004 – 2020.
Since the role of the endowment in meeting budget needs has
increased dramatically in the past few years, City College decided
to review its past performance and future contributions to the
institution. The school hired your company to assess its current
performance and to recommend an optimal portfolio mix. In
particular, the school feels strongly that 0.8% per month
represented a “floor” below which the portfolio expected return
should not drop and wants you to suggest an efficient asset
allocation to achieve this goal.
Your manager has decided to assign the task to your team. You
are required to address the following questions. For simplicity, we
assume that short sales are allowed (unless explicitly ruled out)
and borrowing at the risk-free rate is possible.
1a Plot the portfolio frontier given the five risky assets the
college is investing in (you may use
the solver module in Excel for this purpose and
allow for short sales when developing the frontier).
1b Is the portfolio of risky assets currently
chosen by the college’s fund manager an efficient portfolio? If
not, please explain and calculate the investment proportions (in
the five risky assets chosen by the fund) required to construct an
efficient risky portfolio, which would deliver the same expected
return as the current choice of risky portfolio (for this part,
assume there is no risk-free investment undertaken by the
fund).