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 Mutual Fund Year 1 Year 2 Year 3 Year 4 Year 5 Foreign Stock 10 060 13 120 13 470 45 420 21 930 Intermediate Term Bond 17 640 3 250 7 510 1 330 7 360 Large Cap Growth 32 410 18 710 33 280 41 460 23 260 Large Cap Value 32 360 20 610 12 930 7 060 5 370 Small Cap Growth 33 440 19 400 3 850 58 680 9 020 Small Cap Value 24 560 25 320 6 700 5 430 17 310 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 30 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

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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.

Mutual Fund	Year 1	Year 2	Year 3	Year 4	Year 5
Foreign Stock	10.060	13.120	13.470	45.420	-21.930
Intermediate-Term Bond	17.640	3.250	7.510	-1.330	7.360
Large-Cap Growth	32.410	18.710	33.280	41.460	-23.260
Large-Cap Value	32.360	20.610	12.930	7.060	-5.370
Small-Cap Growth	33.440	19.400	3.850	58.680	-9.020
Small-Cap Value	24.560	25.320	-6.700	5.430	17.310

	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 30.

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 = %

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