In the Markowitz portfolio optimization model defined in equations (8 10) through (8 19), the decision variables represent the percentage of the portfolio invested in each of the mutual funds For example, FS 0 25 in the solution means that 25 of the money in the portfolio is invested in the foreign...

Define the variables to be the dollars invested the in mutual fund For example IB 500 means that 500 ...

In the Markowitz portfolio optimization model defined in equations (8.10) through (8.19), the decision variables represent the

Question:

In the Markowitz optimization model defined in equations (8.10) through (8.19), the decision variables represent the percentage of the invested in each of the mutual funds. For example, FS = 0.25 in the solution means that 25% of the money in the is invested in the foreign stock mutual fund. It is possible to define the decision variables to represent the actual dollar amount invested in each mutual fund or stock. Redefine the decision variables so that now each variable represents the dollar amount invested in the mutual fund. Assume an investor has $50,000 to invest and wants to minimize the variance of his or her subject to a constraint that the returns a minimum of 10%. Reformulate the model given by (8.10) through (8.19) based on the new definition of the decision variables. Solve the revised model with LINGO or Excel Solver.

Portfolio
A 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...