Question: The risk index of an investment can be obtained by
The risk index of an investment can be obtained by taking the absolute values of percentage changes in the value of the investment for each year and averaging them. Suppose you are trying to determine the percentages of your money to invest in T-bills, gold, and stocks. The file S14_95.xlsx lists the annual returns (percentage changes in value) for these investments for the years 1968 through 1988. Let the risk index of a portfolio be the weighted average of the risk indices of these investments, where the weights are the fractions of the portfolio assigned to the investments. Suppose that the amount of each investment must be between 20% and 50% of the total invested. You would like the risk index of your portfolio to equal 0.15, and your goal is to maximize the expected return on your portfolio. Determine the maximum expected return on your portfolio, subject to the stated constraints. Use the average return earned by each investment during the years 1968 through 1988 as your estimate of expected return.
Answer to relevant QuestionsBroker Sonya Wong is currently trying to maximize her profit in the bond market. Four bonds are available for purchase and sale at the bid and ask prices shown in the file S14_96.xlsx. Sonya can buy up to 1000 units of each ...An oil company has oil fields in San Diego and Los Angeles. The San Diego field can produce up to 500,000 barrels per day, and the Los Angeles field can produce up to 400,000 barrels per day. Oil is sent from the fields to a ...Use Excel’s functions (not @RISK) to generate 1000 random numbers from a normal distribution with mean 100 and standard deviation 10. Then freeze these random numbers.a. Calculate the mean and standard deviation of these ...Continuing the preceding problem, suppose that another key uncertain input is the development time, which is measured in an integer number of months. For each of the following scenarios, choose an appropriate distribution ...In Problem 12 of the previous section, suppose that the demand for cars is normally distributed with mean 100 and standard deviation 15. Use @RISK to determine the “best” order quantity—in this case, the one with the ...
Post your question