You have $50,000 to invest in three stocks. Let Ri be the random variable representing the annual return on $1 invested in stock i. For example, if Ri = 0.12, then $1 invested in stock i at the beginning of a year is worth $1.12 at the end of the year. The means are E(R1) E(R2) = R3 = = 0.14, 0.11, and E(R3) = 0.10. The variances are Var R1 = 0.20, Var R2 = 0.08, and Var 0.18. The correlations are r12 = 0.8, r13 = 0.7, and r23 0.9. Determine the = minimum - variance portfolio that attains an expected annual return of at least 0.12. (Round your answers to three decimal places.)
You have $50,000 to invest in three stocks. Let Ri be the random variable representing the annual return on $1 invested in stock i. For example, if Ri = 0.12, then $1 invested in stock i at the beginning of a year is worth $1.12 at the end of the year. The means are E(R1) E(R2) = R3 = = 0.14, 0.11, and E(R3) = 0.10. The variances are Var R1 = 0.20, Var R2 = 0.08, and Var 0.18. The correlations are r12 = 0.8, r13 = 0.7, and r23 0.9. Determine the = minimum - variance portfolio that attains an expected annual return of at least 0.12. (Round your answers to three decimal places.)
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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Question
Transcribed Image Text:You have $50,000 to invest in three stocks. Let Ri be the random variable representing the
annual return on $1 invested in stock i. For example, if Ri = 0.12, then $1 invested in stock i
at the beginning of a year is worth $1.12 at the end of the year. The means are E(R1)
E(R2)
=
R3
=
= 0.14,
0.11, and E(R3) = 0.10. The variances are Var R1 = 0.20, Var R2 = 0.08, and Var
0.18. The correlations are r12 = 0.8, r13 = 0.7, and r23 0.9. Determine the
=
minimum - variance portfolio that attains an expected annual return of at least 0.12. (Round
your answers to three decimal places.)
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