Exhibit 7-4 You Are Given the Following Means, Standard Deviations, and Correlations

question 21

Essay

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.
-[Part 1] Refer to Exhibit 7-4.Determine the minimum variance portfolio that yields an expected annual return of at least 0.10

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Definitions:

Courts of Chancery

Courts that administer equity and handle matters such as trusts, estates, and guardianships, distinct from courts that deal with law.

Law of Equity

A branch of law that supplements common law by providing remedies and justice that are not available in traditional legal systems, focusing on fairness.

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Courts that base their decisions on precedents or judicial rulings rather than written statutes.

Stare Decisis

A legal principle that obligates courts to follow historical cases when making a ruling on a similar current or future case.