An Axis Pension investment adviser is helping you to plan your retirement portfolio. The adviser has recommended
Question:
An Axis Pension investment adviser is helping you to plan your retirement portfolio. The adviser has recommended three stocks namely; Goil, Ecobank, and Fan Milk. The information provided in Tables 2 and 3 are the annual return and variance for each stock, and the covariance between stocks based on historical data.
Stock
Annual Return
Variance
Goil
0.14
0.10
Ecobank
0.10
0.04
Fan Milk
0.12
0.08
Table 2: Annual Return and Variance of Stocks
Stock Combination (i, j)
Goveriance
Goil, Ecobank Goil, Fan Milk Ecobank, Fan Milk
0.4
0.7
0.3
Table 3: Covariance of stock combinations
Determine the proportion of each stock to include in the portfolio to minimize the overall risk, if your retirement goal is to have a total portfolio return of at least 0.45.
Basic Technical Mathematics
ISBN: 9780137529896
12th Edition
Authors: Allyn J. Washington, Richard Evans