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An investment company intends to invest a given amount of money in three stocks. The means and standard deviations of annual returns are as follows:
An investment company intends to invest a given amount of money in three stocks.
The means and standard deviations of annual returns are as follows:
Stock | Mean | Standard Deviation | |
1 | 0.14 | 0.20 | |
2 | 0.11 | 0.25 | |
3 | 0.15 | 0.08 |
Stock Coorelation among annual returns | |
Stocks 1 and 2 | 0.5 |
Stocks 1 and 3 | 0.8 |
Stocks 2 and 3 | 0.1 |
Construct the efficient frontier for portfolios of these stocks. Please explain the involved steps in your modeling and construction.
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