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

question 22

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 2] Refer to Exhibit 7-4.Determine the minimum variance portfolio that yields an expected annual return of at least 0.12.How has the portfolio changed from your answer in Part 1

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Definitions:

Defective Diode

A defective diode is a faulty electronic component that fails to conduct electricity in only one direction as intended, potentially causing circuit malfunctions.

Voltage Regulator

A device within an electrical system that maintains the output voltage at a constant level despite changes in load or input voltage.

Field Current

The electric current that flows through the winding of a generator or motor, generating a magnetic field necessary for their operations.

Brushes

Stationary devices used to conduct current to or from a rotor in electrical components such as alternators and motors.