Consider the Following Data on the Returns from Bonds A Construct the Markowitz Portfolio Model Using a Required Expected

question 50

Essay

Consider the following data on the returns from bonds. $$\begin{array}{l}                                                            \text { Year }\\\begin{array} { | l | c | c | c | c | c | c | c | c | } \hline & \mathbf { 1 } & \mathbf { 2 } & \mathbf { 3 } & \mathbf { 4 } & \mathbf { 5 } & \mathbf { 6 } & \mathbf { 7 } & \mathbf { 8 } \\\hline \text { Bon d 1 } & 0.20 & 0.126 & 0.321 & - 0.39 & - 0.67 & 0.135 & 0.52 & 0.75 \\\hline \text { Bon d 2 } & 0.128 & 0.21 & 0.325 & - 0.243 & 0.169 & 0.125 & 0.304 & 0.286 \\\hline \text { Bon d 3 } & 0.167 & 0.27 & 0.426 & - 0.84 & 0.143 & - 0.46 & 0.147 & 0.704 \\\hline\end{array}\end{array}$$
a. Construct the Markowitz portfolio model using a required expected return of at least 15 percent. Assume that the 8 scenarios are equally likely to occur.
b. Solve the model using Excel Solver.

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Definitions:

Average Investment

The mean amount invested in certain assets or projects over a specific time period, aiming to gauge investment activity.

Net Working Capital

The gap between what a business owns in short-term assets versus what it owes in short-term liabilities.

Net Fixed Assets

The value of a company’s property, plant, and equipment (PP&E) minus its accumulated depreciation, indicating the net book value of its fixed assets.

Total Assets

The sum of all assets owned by a company, including cash, inventories, property, and equipment.