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
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
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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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
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