| 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. | Mutual Fund | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | | Foreign Stock | 10.060 | 13.120 | 13.470 | 45.420 | -21.930 | | Intermediate-Term Bond | 17.640 | 3.250 | 7.510 | -1.330 | 7.360 | | Large-Cap Growth | 32.410 | 18.710 | 33.280 | 41.460 | -23.260 | | Large-Cap Value | 32.360 | 20.610 | 12.930 | 7.060 | -5.370 | | Small-Cap Growth | 33.440 | 19.400 | 3.850 | 58.680 | -9.020 | | Small-Cap Value | 24.560 | 25.320 | -6.700 | 5.430 | 17.310 | | | 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 30. | | | | 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 = % |
