Portfolio1 - 0.140 0.160 Risk versus Return Stdev of return...

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Exhibit 31 Portfolio selection model Stock input data Stock 1 Stock 2 Stock 3 Mean return 0.14 0.11 0.1 StDev of return 0.2 0.15 0.08 Covariances Stock 1 Stock 2 Stock 3 Stock 1 0.04 0.02 0.01 Stock 2 0.02 0.02 0.01 Stock 3 0.01 0.01 0.01 Investment decisions Stock 1 Stock 2 Stock 3 Total Required Fractions to invest 0.5 0 0.5 1 = 1 Constraint on expected portfolio return Actual Required 0.12 >= 0.12 Portfolio variance 0.0148 Portfolio stdev 0.1217 Sensitivity of optimal portfolio to minimum required return Required Stock 1 Stock 2 Stock 3 Port stdev Exp return $B$15 $C$15 $D$15 $B$22 $B$19 0.100 0.0 0 1 0.080 0.100 0.105 0.1 0 0.87 0.083 0.105 0.110 0.3 0 0.75 0.092 0.110 0.115 0.4 0 0.62 0.105 0.115 0.120 0.5 0 0.5 0.122 0.120 0.125 0.6 0 0.37 0.140 0.125 0.130 0.7 0 0.25 0.159 0.130 0.135 0.9 0 0.12 0.179 0.135 0.140 1.0 0 0 0.200 0.140 0.050 0.070 0.090 0.110 0.130 0.150 0.170 0.190 0.210 0.000 0.020 0.040 0.060 0.080 0.100 0.120
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Unformatted text preview: 0.140 0.160 Risk versus Return Stdev of return Expected return A B C D E F G 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 Portfolio selection model Stock input data Stock 1 Stock 2 Stock 3 Mean return 0.14 0.11 0.1 StDev of return 0.2 0.15 0.08 Covariances Stock 1 Stock 2 Stock 3 Stock 1 0.04 0.02 0.01 Stock 2 0.02 0.02 0.01 Stock 3 0.01 0.01 0.01 Investment decisions Stock 1 Stock 2 Stock 3 Total Required Fractions to invest 1.0 1 = 1 Expected portfolio return 0.14 Required Portfolio variance 0.0148 <= 0.02 Portfolio stdev 0.1217...
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This note was uploaded on 05/31/2009 for the course MBA 4500 taught by Professor Eyupcetin during the Spring '09 term at Istanbul Technical University.

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Portfolio1 - 0.140 0.160 Risk versus Return Stdev of return...

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