Exhibit 7-4
You are given the following means,standard deviations,and correlations for the annual return on three stocks.The means are 0.08,0.10,and 0.15.The standard deviations are 0.15,0.20,and 0.30.The correlation between stocks 1 and 2 is 0.62,between stocks 1 and 3 is 0.32,and between stocks 2 and 3 is 0.43.
-Refer to Exhibit 7-4.Suppose you set the weights in the portfolio to a maximum of 0.5 for each stock.Is it possible to achieve a 12% return? What is the portfolio standard deviation in that case?

Question

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The Answer of Exhibit 7-4
You are given the following means,standard deviations,and correlations for the annual return on three stocks.The means are 0.08,0.10,and 0.15.The standard deviations are 0.15,0.20,and 0.30.The correlation between stocks 1 and 2 is 0.62,between stocks 1 and 3 is 0.32,and between stocks 2 and 3 is 0.43.
-Refer to Exhibit 7-4.Suppose you set the weights in the portfolio to a maximum of 0.5 for each stock.Is it possible to achieve a 12% return? What is the portfolio standard deviation in that case?

Exhibit 7-4 You Are Given the Following Means,standard Deviations,and Correlations for the for the Annual