Problem 2:
Following is information for the required returns and standard deviations of returns for A, B, and C.
Here are the expected returns and standard deviations for stocks A, B, and C:
Stock	ri	si
A	7.0%	33.11%
B	10.0%	53.85%
C	20.0%	89.44%
Here is the correlation matrix:
				A	B	C
			A	1.0000	0.1571	0.1891
			B	0.1571	1.0000	0.1661
			C	0.1891	0.1661	1.0000
a. Suppose a portfolio has 30 percent invested in A, 50 percent in B, and 20 percent in C. What are the expected return and standard deviation of the portfolio?
wA =	30%
wB =	50%
wC =	20%
rp =
Portfolio variance =
sp =
b. The partial model lists 66 different combinations of portfolio weights. For each combination of weights, find the required return and standard deviation. If you would like a return of 10.50 percent, what is the smallest standard deviation that you must accept? Why?
Portoflio #	wA	wB	wC	Variance	sp	rp
1	0.0	0.0	1.0
2	0.0	0.1	0.9
3	0.0	0.2	0.8
4	0.0	0.3	0.7
5	0.0	0.4	0.6
6	0.0	0.5	0.5
7	0.0	0.6	0.4
8	0.0	0.7	0.3
9	0.0	0.8	0.2
10	0.0	0.9	0.1
11	0.0	1.0	0.0
12	0.1	0.0	0.9
13	0.1	0.1	0.8
14	0.1	0.2	0.7
15	0.1	0.3	0.6
16	0.1	0.4	0.5
17	0.1	0.5	0.4
18	0.1	0.6	0.3
19	0.1	0.7	0.2
20	0.1	0.8	0.1
21	0.1	0.9	0.0
22	0.2	0.0	0.8
23	0.2	0.1	0.7
24	0.2	0.2	0.6
25	0.2	0.3	0.5
26	0.2	0.4	0.4
27	0.2	0.5	0.3
28	0.2	0.6	0.2
29	0.2	0.7	0.1
30	0.2	0.8	0.0
31	0.3	0.0	0.7
32	0.3	0.1	0.6
33	0.3	0.2	0.5
34	0.3	0.3	0.4
35	0.3	0.4	0.3
36	0.3	0.5	0.2
37	0.3	0.6	0.1
38	0.3	0.7	0.0
39	0.4	0.0	0.6
40	0.4	0.1	0.5
41	0.4	0.2	0.4
42	0.4	0.3	0.3
43	0.4	0.4	0.2
44	0.4	0.5	0.1
45	0.4	0.6	0.0
46	0.5	0.0	0.5
47	0.5	0.1	0.4
48	0.5	0.2	0.3
49	0.5	0.3	0.2
50	0.5	0.4	0.1
51	0.5	0.5	0.0
52	0.6	0.0	0.4
53	0.6	0.1	0.3
54	0.6	0.2	0.2
55	0.6	0.3	0.1
56	0.6	0.4	0.0
57	0.7	0.0	0.3
58	0.7	0.1	0.2
59	0.7	0.2	0.1
60	0.7	0.3	0.0
61	0.8	0.0	0.2
62	0.8	0.1	0.1
63	0.8	0.2	0.0
64	0.9	0.0	0.1
65	0.9	0.1	0.0
66	1.0	0.0	0.0