A 1 Stock A 2 Expected return, E(r) 3 Return standard deviation, GA 4 5 Stock B 6 Expected return, E(r) 7 Return standard deviation, og 8 9 Correlation of A and B returns 10 11 Portfolio 12 Proportion of A, XA 13 Proportion of B, Xg 14 15 Portfolio expected return, E(rp) 16 Portfolio variance, o 17 Portfolio expected return, o B 12% 15% 22% 25% 0.5 25.00% 75.00% <<-- =1-B12 19.500% <<-- =B12 B2+B13 B6 0.0436 20.88% <-- SQRT(B16) 10 B12^2 B3^2+B13^2*B7^2+2 B9 B12 B13 B3 B7 a. Use Solver to compute the proportions x and x which has the minimum standard deviation op. for a por b. Use Solver and a constraint to compute the proportions x and. a portfolio which has the minimum standard deviation, and has a return of at least 18%.
A 1 Stock A 2 Expected return, E(r) 3 Return standard deviation, GA 4 5 Stock B 6 Expected return, E(r) 7 Return standard deviation, og 8 9 Correlation of A and B returns 10 11 Portfolio 12 Proportion of A, XA 13 Proportion of B, Xg 14 15 Portfolio expected return, E(rp) 16 Portfolio variance, o 17 Portfolio expected return, o B 12% 15% 22% 25% 0.5 25.00% 75.00% <<-- =1-B12 19.500% <<-- =B12 B2+B13 B6 0.0436 20.88% <-- SQRT(B16) 10 B12^2 B3^2+B13^2*B7^2+2 B9 B12 B13 B3 B7 a. Use Solver to compute the proportions x and x which has the minimum standard deviation op. for a por b. Use Solver and a constraint to compute the proportions x and. a portfolio which has the minimum standard deviation, and has a return of at least 18%.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:A
1 Stock A
2 Expected return, E(ra)
3 Return standard deviation, A
4
5 Stock B
6 Expected return, E(TB)
7 Return standard deviation, og
8
9 Correlation of A and B returns
10
11 Portfolio
12 Proportion of A, XA
13 Proportion of B, XB
14
15 Portfolio expected return, E(rp)
16 Portfolio variance, o
17 Portfolio expected return,
B
12%
15%
22%
25%
0.5
25.00%
75.00% <<-- =1-B12
с
19.500% <-- =B12 B2+B13*B6
0.0436 <=B12^2 B3^2+B13^2*B7^2+2 B9*B12 B13*B3*B7
20.88% <-- SQRT(B16)
a. Use Solver to compute the proportions x and x for a portfolio
which has the minimum standard deviation op.
b. Use Solver and a constraint to compute the proportions x and x for
a portfolio which has the minimum standard deviation o, and which
has a return of at least 18%.
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