Consider three investments. You are given the following means, standard deviations, and correlations for the annual return on these three investments. The means are 0.12, 0.15, and 0.20. The standard deviations are 0.20, 0.30, and 0.40. The correlation between stocks 1 and 2 is 0.65, between stocks 1 and 3 is 0.75, and between stocks 2 and 3 is 0.41. You have $10,000 to invest and can invest no more than half of your money in any single stock. Determine the minimum-variance portfolio that yields a mean annual return of at least 0.14.

Consider three investments. You are given the following means, standard deviations, and correlations for the annual return on these three investments. The means are 0.12, 0.15, and 0.20. The standard deviations are 0.20, 0.30, and 0.40. The correlation between stocks 1 and 2 is 0.65, between stocks 1 and 3 is 0.75, and between stocks 2 and 3 is 0.41. You have $10,000 to invest and can invest no more than half of your money in any single stock. Determine the minimum-variance portfolio that yields a mean annual return of at least 0.14.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 6P

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Consider three investments. You are given thefollowing means, standard deviations, and correlations for the annual return on these three investments.The means are 0.12, 0.15, and 0.20. The standarddeviations are 0.20, 0.30, and 0.40. The correlationbetween stocks 1 and 2 is 0.65, between stocks 1 and3 is 0.75, and between stocks 2 and 3 is 0.41. Youhave $10,000 to invest and can invest no more thanhalf of your money in any single stock. Determine theminimum-variance portfolio that yields a mean annualreturn of at least 0.14
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