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.

	Annual Return (%)
Mutual Fund	Year 1	Year 2	Year 3	Year 4	Year 5
Foreign Stock	10.06	13.12	13.47	45.42	-21.93
Intermediate-Term Bond	17.64	3.25	7.51	-1.33	7.36
Large-Cap Growth	32.41	18.71	33.28	41.46	-23.26
Large-Cap Value	32.36	20.61	12.93	7.06	-5.37
Small-Cap Growth	33.44	19.40	3.85	58.68	-9.02
Small-Cap Value	24.56	25.32	-6.70	5.43	17.31

(a)

Construct this version of the Markowitz model for a maximum variance of 34.

Let:
	FS = proportion of portfolio invested in the foreign stock mutual fund
	IB = proportion of portfolio invested in the intermediate-term bond fund
	LG = proportion of portfolio invested in the large-cap growth fund
	LV = proportion of portfolio invested in the large-cap value fund
	SG = proportion of portfolio invested in the small-cap growth fund
	SV = proportion of portfolio invested in the small-cap value fund
	= the expected return of the portfolio
	Rs = the return of the portfolio in years

If required, round your answers to two decimal places. For subtractive or negative numbers use a minus sign even if there is a + sign before the blank (Example: -300). If the constant is "1" it must be entered in the box. If your answer is zero enter 0.

Max
s.t.
FS	+ IB	+ LG	+ LV	+ SG	+ SV	- Select your answer -<>=Item 7	R 1
FS	+ IB	+ LG	+ LV	+ SG	+ SV	- Select your answer -<>=Item 14	R 2
FS	+ IB	+ LG	+ LV	+ SG	+ SV	- Select your answer -<>=Item 21	R 3
FS	+ IB	+ LG	+ LV	+ SG	+ SV	- Select your answer -<>=Item 28	R 4
FS	+ IB	+ LG	+ LV	+ SG	+ SV	- Select your answer -<>=Item 35	R 5
FS	+ IB	+ LG	+ LV	+ SG	+ SV	- Select your answer -<>=Item 42
						- Select your answer -<>=Item 45
						- Select your answer -<>=Item 47
FS, IB, LG, LV, SG, SV						- Select your answer -<>=Item 49

(b)

Solve the model developed in part (a).

If required, round your answers to two decimal places. If your answer is zero, enter 0.

FS	%
IB	%
LG	%
LV	%
SG	%
SV	%

Portfolio Expected Return = %