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) = 0.17, E(R2) = 0.15, and E(R3) = 0.12. The variances are Var R1 = 0.25, Var R2 = 0.18, and Var R3 = 0.14. The correlations are r12 = 0.6, r13 = 0.9, and r23 = 0.7. Determine the minimum-variance portfolio that attains a mean annual return of at least 0.14. If needed, round your answers to three decimal digits. Investment decision Stock 1 Stock 2 Stock 3 Fractions to invest
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) = 0.17, E(R2) = 0.15, and E(R3) = 0.12. The variances are Var R1 = 0.25, Var R2 = 0.18, and Var R3 = 0.14. The correlations are r12 = 0.6, r13 = 0.9, and r23 = 0.7. Determine the minimum-variance portfolio that attains a mean annual return of at least 0.14. If needed, round your answers to three decimal digits. Investment decision Stock 1 Stock 2 Stock 3 Fractions to invest
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter10: Introduction To Simulation Modeling
Section: Chapter Questions
Problem 49P
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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) = 0.17, E(R2) = 0.15, and E(R3) = 0.12. The variances are Var R1 = 0.25, Var R2 = 0.18, and Var R3 = 0.14. The correlations are r12 = 0.6, r13 = 0.9, and r23 = 0.7. Determine the minimum-variance portfolio that attains a mean annual return of at least 0.14. If needed, round your answers to three decimal digits.
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Fractions to invest |
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