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FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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State the optimal portfolio in boxes below (monetary amounts rounded to 2 decimals, without £ symbol). Enter your answer here Enter your answer here Enter your answer here Enter your answer here Enter your answer here
Transcribed Image Text:State the optimal portfolio in boxes below (monetary amounts rounded to 2 decimals, without £ symbol). Enter your answer here Enter your answer here Enter your answer here Enter your answer here Enter your answer here
You have £500 to invest in 5 assets whose returns are independent and normally distributed, respectively, as N(1.03,0.05), N(1.04,0.08), N (1.01, 0.01), N (1.09, 0.13) and N (1.06, 0.065), where the first value is mean and second is std. dev. At least 20% of your portfolio should be invested in the first asset, no more than 75% can be made up of second, third and fifth assets combined, and investment in the fourth asset cannot be any bigger than the first asset. Short-selling is not allowed. Consider the tradeoff model with & = 0.2.
Transcribed Image Text:You have £500 to invest in 5 assets whose returns are independent and normally distributed, respectively, as N(1.03,0.05), N(1.04,0.08), N (1.01, 0.01), N (1.09, 0.13) and N (1.06, 0.065), where the first value is mean and second is std. dev. At least 20% of your portfolio should be invested in the first asset, no more than 75% can be made up of second, third and fifth assets combined, and investment in the fourth asset cannot be any bigger than the first asset. Short-selling is not allowed. Consider the tradeoff model with & = 0.2.
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