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) = 0.17, E(R2) = 0.15, and E(R3) = 0.12. The variances are Var R1 = 0.25, Var R2 = 0.18, and Var R3 = 0.14. The correlations are r12 = 0.6, r13 = 0.9, and r23 = 0.7. Determine the minimum-variance portfolio that attains a mean annual return of at least 0.14. If needed, round your answers to three decimal digits.Investment decision Stock 1Stock 2Stock 3Fractions to invest

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Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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You have $50,000 to invest in three stocks. Let R_i be the random variable representing the annual return on $1 invested in stock i. For example, if R_i = 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) = 0.17, E(R₂) = 0.15, and E(R₃) = 0.12. The variances are Var R₁ = 0.25, Var R₂ = 0.18, and Var R₃ = 0.14. The correlations are r₁₂ = 0.6, r₁₃ = 0.9, and r₂₃ = 0.7. Determine the minimum-variance portfolio that attains a mean annual return of at least 0.14. If needed, round your answers to three decimal digits.

Investment decision
	Stock 1	Stock 2	Stock 3
Fractions to invest

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