Mark Decker has identified four stocks for his portfolio, and he wants to determine the percentage of
Question:
Mark Decker has identified four stocks for his portfolio, and he wants to determine the percentage of his total available funds he should invest in each stock. The alternative stocks include an Internet company, a computer software company, a computer manufacturer, and an entertainment conglomerate. He wants a total annual return of 0.12. From historical data, he has determined the average annual return and variance for each of the funds, as follows:
He has also estimated the covariances between stocks, as follows:
Determine the percentage of Mark’s total funds that he should invest in each stock to minimize his overall risk.
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Step by Step Answer:
The first step is to calculate the expected return for each stock This is simply the sum of the annu...View the full answer
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