Business analytics 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 The datafile logo 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 R s the return of the portfolio in year s 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

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Business analytics A second version of the Markowitz portfolio model maximizes expected return subject to a constraint that the variance of the portfolio must be

Business analytics

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.

The datafile logo.

	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
	R_s = the return of the portfolio in year s

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	R₁
FS	+ IB	+ LG	+ LV	+ SG	+ SV	- Select your answer -<>=Item 14	R₂
FS	+ IB	+ LG	+ LV	+ SG	+ SV	- Select your answer -<>=Item 21	R₃
FS	+ IB	+ LG	+ LV	+ SG	+ SV	- Select your answer -<>=Item 28	R₄
FS	+ IB	+ LG	+ LV	+ SG	+ SV	- Select your answer -<>=Item 35	R₅
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