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An investor is developing a portfolio of stocks. She has identified 3 stocks to invest in. She wants to earn at least 5% return but
An investor is developing a portfolio of stocks. She has identified 3 stocks to invest in. She wants to earn at least 5% return but with minimum risk. The problem data is given in the following Excel spreadsheet. Fill the table and calculate the portfolio variance. Complete the covariance matrix. Make a short comment on how good of a portfolio that you have built up to minimize the overall portfolio variance and standard deviation. Show all your steps, SOLVER COMMANDS and EXCEL DATA FUNCTIONS. A B D 1 2 Annual Return 3 Year A B 4 1 3.98% 7.38% 8.76% 5 2 -1.51% 10.45% 6.66% 6.55% 6 3 5.36% 5.15% 7 4 4.98% 5.51% 8 5 6.93% -1.58% 8.43% 9.07% 9 6 -4.32% 9.78% 10 7 9.65% 3.12% 5.58% 3.49% -2.37% 5.92% 5.69% 11 8 5.62% 8.96% 12 9 6.28% -7.10% 13 10 5.75% 10.96% 14 15 Average F G H J 1 2 Covariance Matrix 3 A B 4 A 5 B 6 7 8 A B Total 9 Portfolio 36.8 40.6 22.6 100.0% 10 11 5.00% Expected Return Required Return 12 5.00% 13 14 Portfolio Variance 15
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