You have $50,000 to invest in three stocks. Let Ri be the random variable representing the annual return on $1 invested in stock i. For example, if Ri = 0.12, then $1 invested in stock i at the beginning of a year is worth $1.12 at the end of the year. The means are E(R1) = 0.14, E(R2) = 0.11, and E(R3) = 0.10. The variances are Var R1 = 0.20, Var R2 = 0.08, and Var R3 = 0.18. The correlations are r12 = 0.8, r13 = 0.7, and r23 = 0.9. Determine the minimum-variance portfolio that attains an expected annual return of at least 0.12.

PortfolioA portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...

Data Analysis and Decision Making

4th edition

Authors: Christian Albright, Wayne Winston, Christopher Zappe

ISBN: 978-0538476126

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