(Solved): A second version of the Markowitz portfolio model maximizes expected return subject to a constraint ...

A second version of the Markowitz portfolio model maximizes expected return subject to a constraint that the variance of the portfolio must be less than or equal to some specified amount. Consider the Hauck Financial Service data.

 

Data File

(a) Construct this version of the Markowitz model for a maximum varlance of 34 . Let: FS = proportion of portfollo invested in the forelgn stock mutual fund \( I B= \) proportion of portfolio Invested in the Intermedlate-term bond fund \( L G= \) proportion of portfolio Invested In the large-cap growth fund \( L V= \) proportion of portfolio invested in the large-cap value fund \( 5 G= \) proportion of portfolio invested in the small-cap growth fund \( 5 V= \) proportion of portfollo invested in the small-cap value fund \( \bar{R}= \) the expected return of the portfolio \( R_{S}= \) the return of the portfollo in years If required, round your answers to two decimal places. For subtractive or negatlve numbers use (b) Solve the model developed in part (a). If required, round your answers to two decimal places. If your answer is zero, enter " 0 ". Portfollo Expected Return = \% \begin{tabular}{|l|r|r|r|r|r|} \hline Mutual Fund & Year 1 & Year 2 & Year 3 & \multicolumn{1}{|c|}{ Year 4 } & \multicolumn{1}{|c|}{ Year 5 } \\ \hline Foreign Stock & \( 10.060 \) & \( 13.120 \) & \( 13.470 \) & \( 45.420 \) & \( -21.930 \) \\ \hline Intermediate-Term Bond & \( 17.640 \) & \( 3.250 \) & \( 7.510 \) & \( -1.330 \) & \( 7.360 \) \\ \hline Large-Cap Growth & \( 32.410 \) & \( 18.710 \) & \( 33.280 \) & \( 41.460 \) & \( -23.260 \) \\ \hline Large-Cap Value & \( 32.360 \) & \( 20.610 \) & \( 12.930 \) & \( 7.060 \) & \( -5.370 \) \\ \hline Small-Cap Growth & \( 33.440 \) & \( 19.400 \) & \( 3.850 \) & \( 58.680 \) & \( -9.020 \) \\ \hline Small-Cap Value & \( 24.560 \) & \( 25.320 \) & \( -6.700 \) & \( 5.430 \) & \( 17.310 \) \\ \hline \end{tabular}