Question: 8.8.Reconsider the portfolio selection example given in Section 8.2. A fourth stock (Stock 4) now has been found that gives a good balance between expected
8.8.Reconsider the portfolio selection example given in Section 8.2. A fourth stock (Stock 4) now has been found that gives a good balance between expected return and risk. Using the same units as in Table 8.2, its expected return is 17% and its risk is 18%. Its joint risk per stock with Stocks 1, 2, and 3 is 0.015, 0.025, and 0.003, respectively. Still using a minimum acceptable expected return of 18%, formulate the revised quadratic programming model in algebraic form for this problem. Display and solve this model on a spreadsheet.
| Stock 1 | Stock 2 | Stock 3 | Stock 4 | |
| Expected Return | 21% | 30% | 8% | 17% |
| Risk (Stand. Dev.) | 25% | 45% | 5% | 18% |
| Joint Risk (Covar.) | Stock 1 | Stock 2 | Stock 3 | Stock 4 |
| Stock 1 | 0.040 | -0.005 | -0.015 | |
| Stock 2 | -0.010 | -0.025 | ||
| Stock 3 | 0.003 | |||
| Stock 4 |
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