Consider the Stock Return Data Given Below Develop and Solve the Markowitz Model That Maximizes Expected Return

question 16

Essay

Consider the stock return data given below. $$\begin{array} { | l | c | c | c | c | c | } \hline \text { Stock } & \text { Month 1 } & \text { Month 2 } & \text { Month 3 } & \text { Month 4 } & \text { Month 5 } \\\hline \text { A } & 12.07 & 10.12 & 14.54 & 46.58 & - 19.34 \\\text { B } & 15.95 & 4.16 & 6.31 & - 2.74 & 6.54 \\\text { C } & 30.52 & 16.51 & 34.25 & 45.62 & - 27.21 \\\text { D } & 32.42 & 21.36 & 13.84 & 8.12 & - 6.84\end{array}$$ Develop and solve the Markowitz model that maximizes expected return subject to a maximum variance of 35. Use this model to construct an efficient frontier by varying the maximum allowable variance from 25 to 55 in increments of 5 and solving for the maximum return for each.

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Definitions:

Willing To Pay

The maximum amount a consumer is prepared to spend on a good or service, reflecting the perceived value or utility gained from the purchase.

Ticket

A token or voucher that entitles the holder to admission to an event, activity, or service.

Consumer Surplus

the difference between what consumers are willing to pay for a good or service and what they actually pay.

Market Price

The price at which a product or service is sold in the open market, determined by supply and demand.