Question
a. Fill in the highlighted areas in the spreadsheet above, using formulas so that you can vary the proportion invested in Wending. b. Make a
a. Fill in the highlighted areas in the spreadsheet above, using formulas so that you can vary the proportion invested in Wending.
b. Make a table showing the portfolio standard deviation as a function of the proportion invested in Wending. For which proportion (approximately) is the portfolio standard deviation minimized?
c. [harder, optional] If you know Solver, use it to determine the exact proportion of Wending which minimizes the portfolio standard deviation. This portfolio is also called the minimum variance portfolioand it is further discussed in Chapter 10.
WENDING AND VENDING Expected Standard return deviation 2 3 Wending 15% 1296 4 Vending Solver screen Solver Parameters 6 Proportion of Wending in 7 portfolio 8 Proportion Set Target Cell: Equal To: By Changing Cells: B$12 0.3000 0.7000 Max Min ae of: o of Vending 58$7 Expected portfolio 10 retun 11 Portfolio variance 12 deviation Subject to the Constraints: Enter the right equation for portfolio variance and use Solver to find the weights for min-variance Portfolio standard Beset All 13 Weigh for stock A to get Minimum Portfolio 14 variance, using formula 15 16 17 0.2881 (85 C3 C4-C4 2(2 B5 C3 C4-C3A2-C4 2) Std Dev of Portfolio (Using Data Table to complete Proportion of A 0.00 0.05 0.10 0.15 0.20 0.25 0.30 0.35 0.40 0.45 0.50 0.55 0.60 0.65 0.70 0.75 0.80 0.85 0.90 18 19 20 21 23 24 25 26 27 28 29 30 31 32 34 35 36 37 38 39 Draw a scatter chart of portfolio standard deviation (Y) by vs. weight of stock A (X)
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