Question: 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

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.

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

(a) Construct this version of the Markowitz model for a maximum variance of 40.

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".

Question: 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

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