A second version of the Markowitz portfolio model maximizes expected return subject to a constraint that the variance of the portfolio must be less than or equal to some specified amount Consider the Hauck Financial Service data Click on the datafile logo to reference the data Annual Return ( ) Mutual Fund Year 1 Year 2 Year 3 Year 4 Year 5 Foreign Stock 10 06 13 12 13 47 45 42 21 93 Intermediate Term Bond 17 64 3 25 7 51 1 33 7 36 Large Cap Growth 32 41 18 71 33 28 41 46 23 26 Large Cap Value 32 36 20 61 12 93 7 06 5 37 Small Cap Growth 33 44 19 40 3 85 58 68 9 02 Small Cap Value 24 56 25 32 6 70 5 43 17 31 (a) Construct this version of the Markowitz model for a maximum variance of 34 Let FS proportion of portfolio invested in the foreign stock mutual fund IB proportion of portfolio invested in the intermediate term bond fund LG proportion of portfolio invested in the large cap growth fund LV proportion of portfolio invested in the large cap value fund SG proportion of portfolio invested in the small cap growth fund SV proportion of portfolio invested in the small cap value fund the expected return of the portfolio R s the return of the portfolio in years If required, round your answers to two decimal places For subtractive or negative numbers use a minus sign even if there is a sign before the blank (Example 300) If the constant is 1 it must be entered in the box If your answer is zero enter 0 Max s t FS IB LG LV SG SV Select your answer Item 7 R 1 FS IB LG LV SG SV Select your answer Item 14 R 2 FS IB LG LV SG SV Select your answer Item 21 R 3 FS IB LG LV SG SV Select your answer Item 28 R 4 FS IB LG LV SG SV Select your answer Item 35 R 5 FS IB LG LV SG SV Select your answer Item 42 Select your answer Item 45 Select your answer Item 47 FS, IB, LG, LV, SG, SV Select your answer Item 49 (b) Solve the model developed in part (a) If required, round your answers to two decimal places If your answer is zero, enter 0 FS IB LG LV SG SV Portfolio Expected Return

The Answer is in the image, click to view ...

Question: A second version of the Markowitz portfolio model maximizes expected return subject to a constraint that the variance of the portfolio must be less than

A second version of the Markowitz portfolio model maximizes expected return subject to a constraint that the variance of the portfolio must be less than or equal to some specified amount. Consider the Hauck Financial Service data.

Click on the datafile logo to reference the data.

	Annual Return (%)
Mutual Fund	Year 1	Year 2	Year 3	Year 4	Year 5
Foreign Stock	10.06	13.12	13.47	45.42	-21.93
Intermediate-Term Bond	17.64	3.25	7.51	-1.33	7.36
Large-Cap Growth	32.41	18.71	33.28	41.46	-23.26
Large-Cap Value	32.36	20.61	12.93	7.06	-5.37
Small-Cap Growth	33.44	19.40	3.85	58.68	-9.02
Small-Cap Value	24.56	25.32	-6.70	5.43	17.31

(a)

Construct this version of the Markowitz model for a maximum variance of 34.

Let:
	FS = proportion of portfolio invested in the foreign stock mutual fund
	IB = proportion of portfolio invested in the intermediate-term bond fund
	LG = proportion of portfolio invested in the large-cap growth fund
	LV = proportion of portfolio invested in the large-cap value fund
	SG = proportion of portfolio invested in the small-cap growth fund
	SV = proportion of portfolio invested in the small-cap value fund
	= the expected return of the portfolio
	R_s = the return of the portfolio in years

If required, round your answers to two decimal places. For subtractive or negative numbers use a minus sign even if there is a + sign before the blank (Example: -300). If the constant is "1" it must be entered in the box. If your answer is zero enter 0.

Max
s.t.
FS	+ IB	+ LG	+ LV	+ SG	+ SV	- Select your answer -<>=Item 7	R ₁
FS	+ IB	+ LG	+ LV	+ SG	+ SV	- Select your answer -<>=Item 14	R ₂
FS	+ IB	+ LG	+ LV	+ SG	+ SV	- Select your answer -<>=Item 21	R ₃
FS	+ IB	+ LG	+ LV	+ SG	+ SV	- Select your answer -<>=Item 28	R ₄
FS	+ IB	+ LG	+ LV	+ SG	+ SV	- Select your answer -<>=Item 35	R ₅
FS	+ IB	+ LG	+ LV	+ SG	+ SV	- Select your answer -<>=Item 42
						- Select your answer -<>=Item 45
						- Select your answer -<>=Item 47
FS, IB, LG, LV, SG, SV						- Select your answer -<>=Item 49

(b)

Solve the model developed in part (a).

If required, round your answers to two decimal places. If your answer is zero, enter 0.

FS	%
IB	%
LG	%
LV	%
SG	%
SV	%

Portfolio Expected Return = %

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Accounting Questions!

second version of the Markowitz portfolio model maximizes expected return subject to a constraint that the variance of the portfolio must be less than or equal to some specified amount. Consider the...

A second version of the Markowitz portfolio model maximizes expected return subject to a constraint that the variance of the portfolio must be less than or equal to some specified amount. Consider...

G A 1 Mutual Fund 2 Foreign Stock 3 Intermediate-Term Bond 4 Large-Cap Growth 5 Large-Cap Value 6 Small-Cap Growth 7 Small-Cap Value 8 B Year 1 10.060 17.640 32.410 32.360 33.440 24.560 D E Year 2...

A second version of the Markowitz portfolio model maximizes expected return subject to a constraint that the variance of the portfolio must be less than or equal to some specified amount. Consider...

With a variance of 36, how do I solve part b? please help A second version of the Markowitz portfolio model maximizes expected return subject to a constraint that the variance of the portfolio must...

A second version of the Markowitz portfolio model maximizes expected return subject to a constraint that the variance of the portfolio must be less than or equal to some specified amount. Consider...

Tradeall Inc., leases automobiles for its sales force. On January 1, 2014, the company leased 100 automobiles and agreed to make lease payments of $10,000 per automobile each year. The lease...

Your companys refinery produces two types of automotive fuels: the production cost for the established (A) and the new (B) product is at 1,500 and 2,200 per tonne, respectively. Based on inventory...

( b ) Record adjusting entries for depreciation for 2 0 2 6 . ( Uist debit entry before credit entry. Credit account titles are outomaticolly indented when amount is entered. Do not indent manually....

The force constant of a massless spring is 2 5 . 0 N / m . A mass of 0 . 4 5 kg is oscillating in simple harmonic motion at the end of the spring

Ethics Suppose you are the CEO of a manufacturing firm that is bidding on a government contract. In this situation, the firm with the lowest bid will win the contract. Your firm has completed...

Designing reward structures Answer these two questions about the organi zation units listed below: What behavior should be rewarded? What is an appropriate incentive system? (a) A symphony...

Motivating desired performance Darlington Engineering is a research and development company that designs equipment for nuclear generating stations. The company consists of an administrative unit, a...