Investor can make investments in 5 types of stocks. According to the available data (relating to the past), estimates of the mean values (mathematical expectations) and standard deviations of annual returns were made, which are given in Table 1 (In the table, percentages are given in the form of decimals). The correlation between the annual return of stocks is shown in Table 2. Investor needs to compile a portfolio of these stocks, which would have a minimum variance expected rate of return at least 0,14.

Table 1. Mean values (mathematical expectations) and standard deviations

	Mean	Standard deviation
stock 1	0,14	0,23
stock 2	0,15	0,21
stock 3	0,11	0,18
stock 4	0,09	0,22
stock 5	0,18	0,31

Table 2. Correlations of annual returns

Combination	Correlation
stock 1 and stock 2	0,15
stock 1 and stock 3	0,17
stock 1 and stock 4	0,04
stock 1 and stock 5	0,11
stock 2 and stock 3	0,23
stock 2 and stock 4	0,20
stock 2 and stock 5	0,22
stock 3 and stock 4	0,26
stock 3 and stock 5	0,28
stock 4 and stock 5	0,18

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SOLUTION To compile a portfolio of these stocks with a minimum variance expected rate of return at l... View the full answer