41 Susan Jones would like her investment portfolio to be selected from a combination of three stocks—

Alpha, Beta, and Gamma. Let variables A , B , and G denote the percentages of the portfolio devoted to Alpha, Beta, and Gamma, respectively. Susan’s objective is to minimize the variance of the portfolio’s return, given by the following function:

3A2 + 2B2 + 2G2 + 2AB - 1.1AG - 0.7BG The expected returns for Alpha, Beta, and Gamma are 15%, 11%, and 9%, respectively. Susan wants the expected return for the total portfolio to be at least 10%. No individual stock can constitute more than 70% of the portfolio. Formulate this portfolio selection problem and solve using Excel.

Use several different starting values for the decision variables to try to identify a global optimal solution.