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 0.45 for each stock.Is it possible to achieve a 12% return
What is the portfolio standard deviation in that case

Question

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 0.45 for each stock.Is it possible to achieve a 12% return
 What is the portfolio standard deviation in that case

Quizplus · Accepted Answer

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 0.45 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