Question

An investor wants to determine the safest way to structure a portfolio from several investments. Investment A produces an average annual return of 14% with a variance of 0.025. Investment B produces an average rate of return of 9% with a variance of 0.015. Investment C produces an average rate of return of 8% with a variance of 0.010. Investments A and B have a covariance of 0.00028, and investments A and C have a covariance of -0.006. Investments B and C have a covariance of 0.00125.
a. Suppose the investor wants to achieve at least a 12% return. What is the least risky way of achieving this goal? Round the answers for portfolio investments to one decimal place and portfolio variance to four decimal places. Investment A % B % C % Variance
b. Suppose the investor regards risk minimization as being five times more important than maximizing return. What portfolio would be most appropriate for the investor? Round the answers for portfolio investments to one decimal place and portfolio variance to four decimal places. Investment A % B % C % Variance

Answer 1

Answer:

If minimizing the risk is important according to the solver report the way of investing is A=41.9% ,B=15.34% and C =42.76%

Explanation:

Please see attachment