A second version of the Markowitz portfolio model maximizes expected return subj

Question

A 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.

Click on the datafile logo to reference the data.

Rs = the return of the portfolio in years

- Select your answer -??<>=Item 47

Portfolio Expected Return =  %

Mutual Fund Year 1 Year 2 Year 3 Year 4 Year 5 Foreign Stock 10.060 13.120 13.470 45.420 -21.930 Intermediate-Term Bond 17.640 3.250 7.510 -1.330 7.360 Large-Cap Growth 32.410 18.710 33.280 41.460 -23.260 Large-Cap Value 32.360 20.610 12.930 7.060 -5.370 Small-Cap Growth 33.440 19.400 3.850 58.680 -9.020 Small-Cap Value 24.560 25.320 -6.700 5.430 17.310

Explanation / Answer

FS, IB, LG, LV, SG, SV ? 0

Answer A 10.06FS+17.64IB+32.41LG+32.36LV+33.44SG+24.56SV?0 13.12FS+3.25IB+18.71LG+20.61LV+19.40SG+25.32SV?0 13.47 FS + 7.51 IB + 33.28 LG + 12.93 LV + 3.85 SG - 6.70 SV ? 0 45.42FS-1.33IB+41.46LG+7.06LV+58.68SG-6.70SV? 0 -21.93FS+7.36IB-23.26LG-5.37LV-9.02SG+17.31SV?0 FS+IB+LG+LV+SG+SV=1

FS, IB, LG, LV, SG, SV ? 0

Answer B The solution obtained is shown. Objective Function Value = 18.499

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