Mathematics for Management-
Margaux D. wants to invest a part of her savings in three stocks. From the historical data, she estimated the expected returns, variances and correlation coefficients of these stocks as follows:
|
Stock
|
Expected Annual Return
|
Variance
|
|
1. Facepage
|
.21
|
.06
|
|
2. Tweetter
|
.19
|
.03
|
|
3. LockedIn
|
.18
|
.035
|
|
Correlation Matrix
|
Facepage
|
Tweetter
|
LockedIn
|
|
1. Facepage
|
1.00
|
.014
|
.006
|
|
2. Tweetter
|
.014
|
1.00
|
.015
|
|
3. LockedIn
|
.006
|
.015
|
1.00
|
Margaux would like her portfolio to yield at least 18.5% annually.
Create a computer model to determine how Margaux should allocate her money among the three stocks to achieve her goal while minimizing risk. What percentage of the portfolio should be invested in each stock?