Reconsider Prob. 13.1-4 and its quadratic programming model.
(a) Display this model [including the values of R(x) and V(x)] on an Excel spreadsheet.
(b) Use Solver (or ASPE) and its GRG Nonlinear solving method to solve this model for four cases: minimum acceptable expected return = 13, 14, 15, 16.
(c) Repeat part b while using ASPE and its Quadratic solving method.
(d) For typical probability distributions (with mean μ and variance σ2) of the total return from the entire portfolio, the probability is fairly high (about 0.8 or 0.9) that the return will exceed μ – σ, and the probability is extremely high (often close to 0.999) that the return will exceed μ – 3σ. Calculate μ – σ and μ – 3σ for the four portfolios obtained in part (b). Which portfolio will give the highest μ among those that also give μ – σ ≥ 0?

  • CreatedSeptember 22, 2015
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